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<Research>UBS Expects Data Centers to Potentially Benefit from DeepSeek Pricing Advantage, Reiterates Ratings Buy on GDS Holdings/ VNET Group
Recommend 12 Positive 9 Negative 10 |
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DeepSeek, developed by Chinese foundation model company Hangzhou DeepSeek, was popular recently, with lower cost and better performance, UBS released a research report saying. The DeepSeek-R1 model Reasoner costs only US$0.55 per million input tokens and US$2.19 per million output tokens, compared to US$15 per million input tokens and US$60 per million output tokens from OpenAI's o1 model, respectively. 2024 was the first year of a surge in AI training in China, with about 80-90% of IDC demand driven by AI and concentrated in about 2 hyper-scaler customers, according to UBS. As the costs of AI training and inference decrease significantly, more end-users are expected to use AI to improve their business or develop in the future, especially retail customers. Meanwhile, UBS forecasted IDC demand to vary by geography, with IDC operators with rich resources in first-tier and core cities having greater pricing power. Earlier, it was reported that GDS-SW (09698.HK) (GDS.US) plans to list the assets of its data centers in China in the form of REITs. UBS expected that more private and public REITs will be approved this year, which will help to boost valuation. Therefore, the broker reiterated ratings at Buy on VNET Group (VNET.US)/ GDS-SW, and was optimistic that IDC's fundamentals will remain resilient this year, with target prices of US$7/ US$28.3 for the above 2 stocks. AAStocks Financial News |
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