The Sora craze, can it save the US stock market AI?

If we were to talk about the most eye-catching event in the tech industry since the Year of the Dragon, the emergence of the Wensheng video model Sora would undoubtedly take the spotlight. In the early hours of February 16th, OpenAI officially released the Wensheng video model Sora. Compared to similar tools on the market, Sora not only has the ability to perform more complex tasks but also brings more vivid multi-angle videos, with significant advantages in terms of video generation duration, smoothness, and logic.

The ripple effect caused by Sora's sudden rise to fame has once again brought a significant "shock" to related concept stocks. Interestingly, after the release of Sora, the reactions in different markets and among different individual stocks were quite different. For example, right after the holiday, the AI concept stocks in the A-share market surged, with many small-cap companies riding the Sora concept continuously hitting the 20cm daily limit up.

In stark contrast to the A-share frenzy, investors in the U.S. stock market across the ocean seem to be trading on a completely opposite logic. Take the global creative and marketing SaaS leader Adobe (ADBE.US) as an example. On the day of Sora's release, the stock recorded a 7.4% decline. As of the close of trading on Wednesday this week, the stock has accumulated a monthly decline of 12.83%. Similarly, Alphabet-C, the parent company of Lumiere, which had just released the Wensheng video tool, saw its stock price drop by 1.58% on the same day, while the U.S. image supplier Shutterstock (SSTK.US) experienced a decline of 5.44%.

While some are pleased and others worried, it may be wise for potential competitors' stock prices to drop first. However, the computing power company known as the "strongest selling shovel" in the AI field, NVIDIA (NVDA.US), announced better-than-expected quarterly performance and outlook earlier today. The successive releases of Sora and the earlier ChatGPT are likely to bring NVIDIA a continuous stream of incremental orders, paving the way for its stock price to continue its bullish trend.

In comparison, the response in the Hong Kong stock market seems to be much more subdued. Take the example of Meitu (01357), a company that has actively embraced AI technology in recent years. In the first three trading days of this week, the stock saw no cumulative increase, indicating that Hong Kong investors are still mainly adopting a wait-and-see attitude towards the potential impact of Sora.

Has the impact of Sora already emerged?

OpenAI spared no praise for their newly released Sora. On their official website, OpenAI stated, "Sora provides a foundation for models that can understand and simulate the real world. We believe this ability will be a significant milestone in achieving AGI." Sora is considered a milestone, perhaps breaking through the limit of AI-driven content creation set by AIGC once again. In fact, the large-scale models of Wensheng Video are no longer a new species. By 2023, dozens of related large models have been born, with a global user base exceeding millions. However, most video models are still in the early stages.

Compared to previous models, Sora has significant advantages in the two key indicators of video generation models: duration and resolution. Currently, mainstream models on the market such as Pika1.0, Emu Video, and Gen-2 can generate videos ranging from 3-7 seconds to 4-16 seconds, while Sora can generate videos up to 60 seconds with a resolution of 1080p. Furthermore, Sora also has strong text understanding and detail generation capabilities, able to simulate the physical laws of a virtual world well, creating a more realistic cinematic feel. In conclusion, although there are some bugs in the videos generated by Sora, overall, the model is still at a very advanced level.

Sora has amazed the world, but for other players, it is probably a mix of joy and worry. For example, Zhou Hongyi from 360 believes that the birth of Sora means that the realization of AGI may be shortened from 10 years to 1 year. Elon Musk also expressed agreement with concerns from netizens about the potential destruction of the industry by AI-generated videos and images in response to the sharp drop in Shutterstock's market value.

In terms of specific impact, it is widely expected in the industry that the emergence of Sora will significantly lower the threshold for video generation. In this scenario, players in the AI video and image fields will be the first to bear the brunt. Additionally, industries such as advertising, film, and short videos will also be greatly affected.

Looking at recent stock price performance, it is evident that the US stock market has already factored in these pessimistic expectations. Take Adobe for example, with the rise of AI, the software giant Adobe has been embracing AI without hesitation in recent years, continuously improving product AI integration and developing generative AI applications. Previously, the market had optimistic expectations for Adobe's AI video large models set to be released this year. However, with the stunning appearance of Sora, there may be more variables in whether Adobe's models can win over investors.

Players in the AI image field are also facing impacts. For instance, Shutterstock's stock price has continued to decline after Sora's release. In addition, on the day of Sora's release, the stock prices of streaming companies like Netflix (NFLX.US), Disney (DIS.US), and data asset company Getty Images (GETY.US) also experienced varying degrees of decline.

New Investment Opportunities in the Industry Chain?

Sora is leading a new era of AI video generation, and the resulting changes in the industry landscape will inevitably bring impacts while also nurturing new investment opportunities.

Firstly, in terms of certainty, upstream "shovel sellers" are expected to be one of the most benefited groups. Taking NVIDIA, the benchmark of this global AI trend, as an example, the company has now formed a product portfolio of "GPU+CPU+DPU," becoming the powerhouse of computing power in various fields such as data centers, gaming graphics cards, professional visualization, and autonomous driving. The emergence of phenomenon-level products such as Sora and earlier ChatGPT will bring strong incremental demand for companies like NVIDIA, as can be seen from NVIDIA's latest quarterly performance and outlook.

For downstream application industries, the impact may vary. Taking the film and television industry with the highest relevance as an example, given that Sora can generate complete and logical videos through prompt words, it can be expected that in the short term, Sora as a tool product will directly help improve production efficiency and reduce costs. On one hand, Sora can directly generate realistic special effects scenes to reduce production costs spatially, and also significantly shorten the process of film and television shooting in terms of time; on the other hand, Sora is expected to greatly enrich the creativity and style of film and television works.

Looking further ahead, the emergence of Sora will inevitably significantly lower the threshold for video content production, allowing non-professional teams in the future to create video content of professional standards. In other words, as the entry threshold further relaxes in the future, the competitive landscape of video content producers may be reshaped again, with differentiation among film and television production companies likely unavoidable. In this process, companies with core directors, IP resources, better creativity, and emotional works are likely to stand out.

The gaming industry is also considered one of the industries where Sora can generate significant positive value. In a sense, games are also a manifestation of the virtual world, and Sora's understanding and simulation of the physical world can be highly compatible with game scene development, thereby helping game developers create characters or background stories.

OpenAI also proposed in the Sora technical report that Sora can simulate the digital process of video games. According to the official video demonstration, Sora can control basic operations of the "Minecraft" game character while rendering the game world with high-quality dynamics at the same time. Based on this, Sora may be applied in generating game animations and scenes in the future, potentially reducing the costs for game developers.

In conclusion, whether in the field of AI videos, AI images, or derivative industries such as film, television, and games, Sora will be a milestone tool product that is extremely practical and can help developers reduce costs and increase efficiency.

However, for the same reason, the entry barriers for many related industries may continue to decrease in the future, leading to intensified supply-side competition. Whether leading companies in various fields such as Adobe, Shutterstock, Netflix, etc., can maintain their advantages in the new industrial transformation process remains to be seen. For investors in the field, given the current uncertainties in technology and business models, retaining a bit more "cool thinking" might be a wise move.