Iluvatar (9903.HK): China AI Tour: China AI spending and product mix upgrade to drive growth ahead; Buy

We hosted Iluvatar's management on Sep 8 in Shanghai during our China AI Tour. Management remains positive on AI spending in China and aims for continuous AI chips specification upgrades to capture the growing demand. We remain positive on Iluvatar's strong shipment growth ahead and its product mix upgrade towards next-generation products, although the tight supply of key components could cap the company's shipments and profitability. Key drivers for Iluvatar includes: (1) China's AI capex upcycle, (2) a growing local AI ecosystem, including AI chips, servers, networking, foundation models, and AI applications, (3) a product mix upgrade towards AI chips with stronger computing performance and higher ASP, and (4) client base expansion towards local CSPs. Maintain Buy. Key takeaways: Management is positive on AI spending in China, and mentioned that Iluvatar is promoting the product mix upgrade towards next-generation AI computing boards, along with related supernode products, which carr