China Galaxy Securities (CGS) released a research report indicating that both the overall market and the AI sector showed a "first decline then rebound" trend in October, ending with a slight decline. Emerging industries such as quantum technology, biomanufacturing, hydrogen and nuclear fusion energy, brain-computer interfaces, embodied intelligence, and 6G are expected to become new economic growth drivers.

Key sectors and companies to watch include: 1. Domestic computing power supply chain 2. IDC service providers and computing power leasing 3. Domestic IT innovation manufacturers 4. AI agents and applications 5. Cloud computing providers 6. All-in-one devices and edge AI 7. Data element supply chain (supply, circulation, application) 8. EDA (Electronic Design Automation)

**Key Insights from CGS:** In October, the AI sector index (884201.WI) fell 2.28%, while the Shanghai Composite Index rose 1.85%, the CSI 300 dipped 0.0006%, and the ChiNext Index declined 1.56%. AI sector trading volume reached 1.617 trillion yuan, up 15.23% YoY but down 39.24% MoM. The sector saw significant divergence post-Q3 earnings disclosures, with outperformers like Kingsoft Office and Hehe Information benefiting from policy tailwinds, while high-valuation stocks under earnings pressure faced corrections.

**"AI+" Commercialization Gains Momentum Under 15th Five-Year Plan** The draft proposal for China’s 15th Five-Year Plan emphasizes the "AI+" initiative, accelerating integration across R&D, manufacturing, governance, and services. Unlike previous digital industrialization efforts, this strategy aims to empower all industries. Per the State Council’s August guidelines, AI must achieve deep integration with six key sectors by 2027, with next-gen smart devices/agents exceeding 70% adoption. By 2030, AI-driven high-quality development targets 90% penetration.

**U.S. Export Controls May Spur Domestic Software Substitution** On October 10, the U.S. announced plans to restrict exports of critical software to China. While no policies are yet implemented, China’s historical reliance on imported EDA/CAD tools makes localization inevitable. Short-term disruptions may occur, but China’s software ecosystem now has the technical, policy, and market capacity to drive substitution—particularly in EDA and industrial software, where breakthroughs are urgent.

**Risks:** Slower-than-expected tech iteration; intensified competition among tech giants; regulatory hurdles; supply chain disruptions; weak downstream demand.