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Recently, the market has been stimulated by the favorable news that technology giants such as Apple and Meta have deployed AI glasses products, and many AI glasses concept stocks have been sought after by funds. As of August 16, Asia Optoelectronics has been on the daily limit for 4 consecutive days, Huaying Technology has been on the daily limit for 3 consecutive days in 6 days, Zowee Technology has been on the daily limit for 3 consecutive days, and Doctor Eyewear has been on the daily limit for 5 consecutive days. Many concept stocks have been on the daily limit.

China Securities Journal reporters noticed that in this round of rising cycle of the smart glasses industry chain, semiconductor and artificial intelligence stocks were heavily held by well-known fund managers such as Xie Zhiyu, Hu Yibin and Liu Yuanhai, while there were also small and medium-cap stocks held by only some foreign institutions, and domestic public fund managers all missed the opportunity.

China Securities Journal reporters interviewed several fund managers and researchers from Debon Fund, Rongtong Fund, and Golden Eagle Fund to explore the logic behind the rise of the smart glasses sector and the opportunities in the future market. Zhang Peng, fund manager of Rongtong Fund, told reporters that smart glasses concept stocks have attracted attention from funds. The main logic behind this is that the continuous upgrading and iteration of smart glasses has become the most cost-effective hardware landing solution for AI at present. The market expects AI smart glasses to become a new generation of popular consumer electronic products, or even a new generation of computing platforms. At present, we have seen the continued hot sales of popular products and the active layout of domestic and foreign technology giants.

Many public fund managers are investing heavily in pan-AI applications

Recently, there are reports that the Apple team is continuing to experiment with the development of multiple smart glasses products, and is expected to launch a low-cost version of Vision Pro next year. Previously, Meta and Ray-Ban's second-generation smart glasses product Ray-Ban Meta became a hit on social networking sites. Stimulated by the relevant news, domestic Apple industry chain stocks and AI glasses have been sought after by funds.

"Smart glasses are not a new concept. AR and VR glasses have existed as early as a few years ago. But this year, with the popularity of AI and the iterative evolution of generative artificial intelligence models, computing power has been greatly improved, opening up new imagination space for artificial intelligence glasses." A researcher from a fund company in South China told reporters.

From the perspective of individual stocks, Crystal Optech is a domestic optoelectronic component manufacturer engaged in the research and development, production and sales of precision thin-film optical products. It is also regarded by the market as one of the smart glasses concept stocks. From February to now, the company's stock price has risen by 100.41%. The company's 2024 interim report shows that a total of 51 fund companies hold positions, including Xie Zhiyu of Xingzheng Global Fund, Hu Yibin of Huaan Fund and Liu Yuanhai of Soochow Fund.

Specifically, the 10 billion fund Xingquan Herun LOF, Xingquan Heyi A and Xingquan Social Value Three-Year Holding managed by Xie Zhiyu respectively invested 46.0891 million shares, 24.7691 million shares and 2.5011 million shares of Crystal Optech in the second quarter of this year. Among them, Crystal Optech ranks seventh in Xingquan Herun LOF's heavy holdings.

Xie Zhiyu's main holding logic is to "explore related industrial chains such as pan-AI applications, semiconductors, new energy vehicles, and home appliances, and conduct long-term tracking and layout of companies with core competitiveness."

Seven funds managed by Hu Yibin, including Huaan Media Internet C, Huaan Economic Pilot A, and Huaan Shanghai-Hong Kong-Shenzhen Extension Growth A, hold 36.2876 million shares of Crystal Optech. In addition, Crystal Optech also appears as a semiconductor concept in the top ten holdings of Soochow Mobile Internet C managed by Liu Yuanhai.

"We pay close attention to and always insist on allocating a portion of technological innovation in the application of Internet of Things, Metaverse, Industrial Internet, AR/VR, and cloud computing. At the same time, we continue to closely explore and track investment opportunities in new channels, new technologies, new hardware, and new forms of artificial intelligence. We highly recognize that AI will continue to change human life, and attach great importance to the new business opportunities formed by the resonance of AI and IOT industries, as well as the innovative ecology of AI applications on the B-end and C-end." Hu Yibin said in the second quarter report.

Some "hot stocks" have few public holdings

However, the reporter noticed that among the hot smart glasses stocks that have been hyped up by funds since July, few fund managers have made early arrangements for concept stocks, and most of the rising stocks are small-cap stocks. Institutions, especially public funds, have relatively few holdings.

Asia Optoelectronics is a high-tech enterprise focusing on the research and development, design, production and sales of optoelectronic display components. Before this round of rise, Asia Optoelectronics' stock price fell from 44.32 yuan per share at the beginning of the year to 17.43 yuan per share. As of the 16th, after the fourth daily limit, it returned to 27.50 yuan per share.

Asia Optoelectronics has recently risen by more than 50%. Among the company's institutional holdings, only three QFII institutions, namely, UBS, Barclays Bank and Morgan Stanley International, hold the shares, and no domestic public fund managers hold any shares. Zowee Technology, which has risen for four consecutive trading days, has accumulated a 38.48% increase. The stock is also held by only four QFII institutions, namely, JPMorgan Chase, Barclays Bank, Goldman Sachs Group and UBS.

The same is true for the popular stock Dr. Glasses. Since July 19, Dr. Glasses has risen by nearly 225%, but only the Guotou Ruili LOF and Guotou Ruiyin Industry Ruixuan A managed by Guotou UBS Fund Manager Qi Fupeng hold 1.6583 million and 658,800 shares of Dr. Glasses respectively. However, the positions of the two funds are relatively low, and the strong rise of a single stock has not formed a significant performance return. In the market fluctuations, a diversified, low-position combination is Qi Fupeng's main holding strategy in the second quarter of this year.

Liu Zhongteng from the Equity Research Department of Golden Eagle Fund told reporters that smart glasses can be disassembled into: optics, chips, sensors, displays, speakers, structural parts, microphones, cameras, interactions and batteries; optics can be disassembled into: optical waveguides, traditional lenses, photochromic lenses, etc.; displays can be disassembled into: LCOS, Micro OLED, Micro LED, etc.; structural parts can be disassembled into: hinges, domestic frames, international frames, luxury frames, etc.

"If we break down smart glasses in detail, there are many companies in the industry chain, and each company is responsible for a small part of the industry chain, resulting in a smaller market value. At the same time, the performance elasticity of small and medium-cap stocks is higher, and the shipment volume of smart glasses can bring more obvious growth." Liu Zhongteng said.

Fund manager: AI glasses are expected to see explosive growth

TheVerge data shows that as of May 2024, the global sales of Ray-Ban Meta smart glasses have exceeded 1 million units. In addition to Meta, Apple, Xiaomi and other major domestic and foreign manufacturers have also deployed AI glasses. Why have smart glasses once again become the focus of market attention?

Lu Yang, fund manager of Debon Fund, believes that in the past, the product iteration direction of smart glasses focused more on display, such as Meta's VR and Apple's MR. The ultimate display effect is often accompanied by problems such as size, weight and battery life. With the continuous advancement and terminal-side of AI large models, smart glasses have gradually opened up branches that focus on interaction and light display, such as enhancing the experience in the form of personal assistants through voice interaction, gesture interaction, eye tracking, etc. And with relatively cheap pricing, there is a better foundation for market promotion and accelerated popularization. For example, the price difference between regular and AI models of some brands is not large, and users are more motivated to try spontaneously.

Zhang Peng told reporters that in the past, smart glasses were not mature, did not impress consumers with their core experience, and were expensive and technologically immature, making it difficult for consumers to pay for them. However, with the continuous maturity of display module technology, the continued investment of technology giants, and the continuous exploration of smart glasses application scenarios by various manufacturers, AI glasses are expected to usher in explosive growth.

"Individual stocks in the industrial chain will definitely benefit from this round of explosive growth of AI glasses. It is recommended to pay attention to the targets corresponding to the links in the industrial chain with the highest value share and the best structure." Zhang Peng said.

After the surge in the number of stocks in the industry chain, Zhang Peng believes that the key to the company's performance realization and valuation consumption lies in the active layout of technology giants and consumer electronics leaders, whether they can quickly promote the shipment volume and penetration rate of AI smart glasses. If the promotion rhythm is in line with expectations and smart glasses truly enter a period of rapid growth, the industry chain targets can achieve a double increase in valuation and performance.

Lu Yang also believes that AI glasses are a very good innovation field. Although some companies with clear industry layout are expected to benefit, and their main businesses often have a relatively clear performance turning point with the recovery of consumer electronics, the industry is relatively new and has not yet reached the stage where industry-related stocks benefit widely. When investors are actively paying attention to opportunities in the sector, they also need to carefully identify the profitability of the company. Of course, for companies with solid performance and clear marginal improvements, they can be appropriately optimistic.

"Since investment often precedes industrial development, individual stocks may rise first. In the medium and long term, with the iteration of technology, the continuous upgrading of AI models, and changes in user habits, the sales of smart glasses may show a gradual upward trend. We also need to maintain a long-term perspective on performance realization." Liu Zhongteng said.

Editor: Yang Yucheng

Proofreading: Zhao Yan

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