The core theme of this market cycle is AI, which is divided into two parts: hardware and software.The hardware sector is primarily represented by the NVIDIA supply chain, with NVIDIA being the main representative in the US stock market. Here, we focus on optical modules (e.g., NewEase, Shenghong Technology, Zhongji Xuchuang), servers (e.g., Industrial Fulian, Zhongke Shuguang), liquid cooling (e.g., Invec), and power supplies (e.g., Megmeet, Oulu Tong).The hype around hardware began in 2023 and has peaked this year. Moving forward, I personally lean towards a phase of high-level consolidation and gradual correction, similar to previous trends in new energy and liquor.The most lucrative phase of hardware has passed, and we are gradually entering a stage where it becomes less appealing. If there is any market movement, it will likely be limited to a few companies.Next comes the software sector, which we commonly refer to as the application side. Regardless of how promising AI development is or how advanced the hardware is, it ultimately needs to be implemented in applications that generate profits. Otherwise, all the AI infrastructure built would just be a castle in the air.The hype around AI hardware has lasted for three years, but the real explosion in AI applications is where the significant gains will be. The previous wave of the internet created outstanding companies like Tencent and Alibaba, and the same principle applies to the AI application side. If we missed the big trend in AI hardware due to a lack of understanding, the explosion in AI applications will definitely be something we can engage with and utilize.However, selecting quality targets in the application sector is more challenging than in hardware. First, the scope is broader, and second, most companies currently have poor fundamentals and are still in a speculative phase. This will depend on one’s stock-picking ability.Below, I have compiled a list of application-related targets for reference.In the US market: If NVIDIA serves as a benchmark for hardware, then Google is the benchmark for software in the application sector.In the Hong Kong market: Focus on four main targets: Tencent, Alibaba, Baidu, and Kuaishou.In the A-share market, it is still quite chaotic, but key companies to track include BlueFocus, 360, iFLYTEK, Kunlun Wanwei, Torstar, Yidian Tianxia, Sangfor, and Shengguang Group.In summary, the first half of AI is hardware, which has already exploded, and the second half, applications, will definitely explode as well, and the scale will be greater than that of hardware.These are my genuine thoughts; if you find them helpful, please like and encourage me.Plans and quality targets for December are in preparation, so please look forward to the detailed article.