Guosen Securities has released a research report stating that the iteration speed of major AI applications is accelerating in 2026. Following the lead of OpenAI, AI applications are evolving from single-point tools to being deeply integrated into workflows. Financing processes for leading model companies are also speeding up, leading to a continued positive outlook on the AI application industry trend. The issuance rhythm of game licenses remained stable in April and May, with a dense release of new IP trendy toy products. The firm maintains a positive view on the prosperity of the gaming and IP trendy toy sectors, advising attention to the summer schedule deployments of leading companies in these fields.

Regarding AI applications, the reconstruction of traffic and content service ecosystems, coupled with advancements in multimodal technology, is accelerating cost reduction and efficiency improvement in areas like AI comics/dramas and gaming. The report suggests monitoring the potential for a correction in the negative narrative surrounding AI applications. It also emphasizes focusing on the sustainability of new product cycles. Given the current low valuation and low market crowding, the gaming sector presents good value for medium-term positioning, with a bottom-up approach recommended to grasp product cycles, performance, and companies with tangible AI product deployments.

Key views from Guosen Securities are as follows:

**April Underperformance vs. Market:** 1) In April 2026, the media sector (Shenwan Media Index) rose 2.23%, underperforming the CSI 300 Index by 5.80 percentage points, ranking 20th among the 31 primary Shenwan industries. 2) In terms of individual stock performance, Liansheng Technology, Guizhou Broadcasting & TV Network, Guangdong Guangsha Media, and China Sports Industry led gains, while CITIC Press, Bona Film Group, Diansheng Shares, and Qitian Technology were among the top decliners. 3) Valuation-wise, the current Shenwan Media Index TTM-PE is 42.1x, at the 73.0th percentile over the past five years.

**Stable License Issuance Rhythm; Focus on Opportunities Driven by New Product Cycles, Sector Prosperity, and AI Applications:** 1) In April, 147 domestic games and 7 imported games received approval. From January to April 2026, a total of 621 game licenses were issued, a year-on-year increase of 21.8%. The rhythm of domestic game license issuance remains consistent, with continued issuance of import licenses. 2) In March, the actual sales revenue of China's game market was RMB 31.5 billion, up 17.9% year-on-year. The mobile game market's actual sales revenue was RMB 22.3 billion, up 12.4% year-on-year. 3) Driven by new products, regulatory policies, and AI applications, the sector has potential for upward movement in the medium to long term, with a key focus on the performance of new releases.

**Mango TV and Tencent Lead Variety Show Market; AI Live-Action Dramas Gain Rapid Traction:** 1) According to Dengta Professional Edition data, the total box office in April this year was RMB 1.038 billion, down 13.3% year-over-year. The May Day holiday box office (including service fees) was RMB 758 million, up 10.3% year-on-year. 2) In the drama series market, among the top 10 online series by full-episode playback volume in April, "Yuelin Qiji" topped the list with 781 million plays. It was followed by "Miyu Ji" and "Zhu Yu," with 761 million and 555 million plays, respectively. 3) In the variety show market, iQIYI & Tencent's "Let's Go! Season 6" ranked first with a 22.13% share of the full-episode online market. Youku's "Heart Signal: Winter" ranked second with an 8.89% share, and Mango TV's "Sisters Who Make Waves 2026" ranked third with a 6.21% share. Among the top ten online variety shows, Mango TV/Tencent/Youku/iQIYI held 4, 4, 1, and 2 spots, respectively.

**AI Applications: AI Agents See Full-Scale Breakout and Implementation; Financing for Leading Model Companies Accelerates:** 1) OpenAI's GPT-5.5 has seen a leap in Agent capability, enabling autonomous planning, multi-step execution, and tool invocation to complete complex tasks. 2) Kimi-K2.6 has achieved comprehensive upgrades in code writing, long-range task execution, and Agent cluster capabilities, enabling collaboration among hundreds of Agents. 3) DeepSeek-V4 and Kimi-K2.6 rank first and second, respectively, in the global open-source model rankings by Artificial Analysis. 4) Office platforms like Feishu, DingTalk, and Office have fully integrated multiple Agents. 5) From April to May, financing processes for companies like Moonshot AI, DeepSeek, and Anthropic have accelerated.

**Key Recommended Portfolio:** The April investment portfolio consisted of Giant Network Group, Pop Mart, Kunlun Tech, and Shunwang Technology. The May investment portfolio consists of Perfect World, Pop Mart, Chinese All Digital Publishing, and Huace Film & TV.

**Risk Warnings:** Performance below expectations, technological progress below expectations, and regulatory policy risks.