February 23, 2026 05:01 AM GMT Telecom & Networking Equipment Into the Spotlight: Optical Market Opportunities Tiffany.Yeh@morganstanley.com +886 2 7712-3032 Morgan Stanley & Co. LLC Joseph Moore Equity Analyst Joseph.Moore@morganstanley.com +1 212 761-7516 Telecom & Networking Equipment The optical market is set to reach $65bn+ in our '28 base case (~30% CAGR) on the back of increasing speed/investment in AI data centers. As traditional networks reach their limits, new optical technologies are poised for a ...

Group 1 - MSCI announced the results of its February index review, adding 37 stocks to the MSCI China Index, including notable A-shares and Hong Kong stocks [1] - The MSCI China Index is significant as it is part of the MSCI Global Standard Index series, which means stocks included will attract substantial passive fund tracking [1] - The adjustments are based on objective quantitative indicators such as market capitalization and liquidity, with four annual reviews scheduled [1] Group 2 - The MSCI Global Standard Index added 63 stocks and removed 61, with the largest new additions being AST SpaceMobile, Coherent Corp, and FTAI Aviation [2] - Adjustments will take effect after the market closes on February 27, 2026, with passive funds likely to adjust their positions at the end of the trading day to minimize tracking error [2] - Historical data shows that newly added A-shares to the MSCI China Index typically achieve stable excess returns between the announcement and the effective date of the adjustments [2] Group 3 - Institutions expect international funds to further increase their holdings in Chinese assets in 2026, with a slight increase in the overweight level of Asian investment funds towards Chinese stocks [3] - UBS identified that 143 out of 800 tracked active overseas funds had no exposure to Chinese stocks as of Q4 2025, indicating potential inflows of $16 billion if these funds reallocate to benchmark weights [3] - Active foreign institutional investors are selectively buying sectors such as internet, insurance, renewable energy, and industrials, while showing caution towards automotive and healthcare sectors [3]

明晟公司（MSCI）当地时间2月10日宣布指数评审结果，MSCI全球指数将新增63只证券，并剔除61只 证券。MSCI发达市场指数新增最大的三支证券分别是AST SpaceMobile、Coherent Corp和FTAI Aviation；MSCI新兴市场指数新增最大的三支证券分别是宏桥控股、世纪华通和鸿劲精密。 ...

上天天基金APP搜索777注册即可领500元券包，优选基金10元起投！限量发放！先到先得！ 当地时间2月10日，美股主要指数收盘涨跌不一，道指续创收盘新高。盘面上，科技股多数下 跌，英特尔跌超6%，美光科技跌逾2%，谷歌跌超1%。尽管美联储释放政策稳定信号、科技 巨头持续推进AI应用落地，但通胀反复、劳动力市场边际疲软及监管不确定性交织，令投资者 对高估值科技股持谨慎态度。市场正在轮动至AI交易冲击较小的板块，材料、公用事业等行业 近期表现较佳。 北京时间2月11日凌晨，国际指数编制公司MSCI公布了其2026年2月的指数季度调整结果， 本次调整结果将于2026年2月27日收盘后生效。本次调整中，MSCI全球标准指数新增63只 个股，其中包括33只A股标的；同时移出61只个股，其中包括9只A股标的。 MSCI中国A股指数新纳入33只股票 北京时间2月11日凌晨，国际指数编制公司MSCI公布了其2026年2月的指数季度调整结果， 本次调整结果将于2026年2月27日收盘后生效。2月份的季度调整公布了MSCI全球标准、 MSCI全球小盘、MSCI全球微小盘等主要指数系列的新增、剔除名单。MSCI此次季度评审不 涉 ...

责任编辑：李桐 MSCI表示，MSCI全球指数（MSCI ACWI Index）将新增63只证券，并剔除61只证券。 MSCI发达市场指数（MSCI World Index）新增最大的三支证券分别是AST SpaceMobile A、Coherent Corp和FTAI Aviation。 MSCI新兴市场指数（MSCI Emerging Markets Index）新增最大的三支证券分别是Shandong Hontron Aluminum Industry Holding A、世纪华通和Hon． Precision。 MSCI发达市场指数（MSCI World Index）新增最大的三支证券分别是AST SpaceMobile A、Coherent Corp和FTAI Aviation。 MSCI新兴市场指数（MSCI Emerging Markets Index）新增最大的三支证券分别是Shandong Hontron Aluminum Industry Holding A、世纪华通和Hon． Precision。 责任编辑：李桐 MSCI表示，MSCI全球指数（MSCI ACWI Index）将新增63 ...

Core Insights - The article discusses the critical role of diamond materials in thermal management for high-power electronic devices, particularly in the context of AI and semiconductor applications. It highlights the advancements in diamond-based materials and their potential to address the increasing thermal challenges posed by modern high-performance chips [2][4]. Group 1: Diamond Thermal Management Materials - Diamond is recognized as a leading thermal management material due to its exceptional thermal conductivity, which can reach 2000-2200 W/m·K for natural single crystal diamonds, significantly surpassing copper (approximately 400 W/m·K) and aluminum (approximately 240 W/m·K) [7][4]. - The main types of diamond thermal management materials include single crystal diamonds, diamond-copper composites, diamond-aluminum composites, and diamond/SiC substrates, each tailored for specific applications and performance requirements [6][8]. Group 2: Single Crystal Diamond - Single crystal diamond is considered the "ultimate material" in thermal management, offering unparalleled thermal conductivity and potential applications in AI data centers, laser heat sinks, and high-power devices [7]. - Despite its superior performance, challenges such as high costs, size limitations, and interface thermal resistance hinder its widespread adoption [7]. Group 3: Diamond-Copper and Diamond-Aluminum Composites - Diamond-copper composites achieve a balance between high thermal conductivity (up to 600 W/m·K) and good machinability, making them suitable for various applications, including chip cooling and high-power semiconductor packaging [10][11]. - Diamond-aluminum composites provide a lightweight alternative with thermal conductivity around 500 W/m·K, ideal for aerospace and portable high-power electronic devices [14][15]. Group 4: Diamond/SiC Composite Substrates - Diamond/SiC composite substrates are emerging as ideal materials for electronic packaging due to their high thermal conductivity, thermal expansion matching, and low density, although challenges in fabrication and cost remain [16][17]. Group 5: Semiconductor Packaging Solutions - The article emphasizes the need for improved thermal management solutions in semiconductor packaging, as traditional materials often fail to meet the high thermal demands of modern devices [18]. - Direct bonding techniques between diamond and semiconductor materials are being explored to enhance thermal conductivity, although challenges in surface quality and bonding conditions persist [21][22]. Group 6: Future Thermal Management Strategies - The collaboration between companies like TSMC and NVIDIA is highlighted, focusing on advanced packaging techniques and materials to address the thermal challenges posed by next-generation AI chips, which may reach power densities of 2000-5000W [25][27]. - The evolution of thermal management is seen as critical to the performance of high-density chips, necessitating a multidisciplinary approach to optimize thermal solutions from the atomic level to system-wide integration [50].

Summary of Telecom & Networking Equipment Conference Call Industry Overview - The conference call focused on the **Telecom & Networking Equipment** industry in **North America** with a specific emphasis on the **AI trade** and **optical componentry** market [1][3][4]. Key Points 1. Performance Metrics - Networking returns in 2025 were concentrated in AI and optical trades, with a **100% return YTD** for optical [1]. - The overall networking universe returned approximately **55% YTD**, outperforming NASDAQ by about **35%** [3]. - AI names saw a **110% increase** in returns, building on an **85% return** from the previous year [3]. 2. AI Trade and Optical Market - The AI trade has broadened beyond semiconductor names, positively impacting infrastructure, particularly in optical [3]. - Optical components led the AI basket performance with a **155% increase** and **40% estimate revisions** [3]. - The expectation is that the AI trade will continue, especially in optical, through the first half of 2026, but selectivity will be necessary for full-year returns [4]. 3. Investment Recommendations - Upgrades were made for **MSI** to Overweight (OW), with continued OW ratings for **AXON**, **CSCO**, and **ANET** [1][4]. - Companies expected to attract excess returns from the AI trade include **GLW**, **CIEN**, **LITE**, and **COHR** [4]. - Core networking names like **CSCO** and **ANET** are highlighted as attractive opportunities due to Ethernet's growing market share [5][9]. 4. Caution on Pricing and Market Dynamics - There is caution regarding the sustainability of pricing in the optical market due to increased competition and capacity investments [4]. - If capital expenditure (capex) data points continue to be revised positively, expectations for optical names may hold throughout the year [4]. 5. Public Safety Sector - The public safety sector, particularly companies like **AXON** and **MSI**, is viewed as well-positioned for growth due to high public safety budgets and the impact of OBBBA funding [10][60]. - Despite recent underperformance, there is optimism for recovery in public safety names as demand conditions improve [10][11]. 6. Company-Specific Insights - **Cisco (CSCO)** is expected to benefit from a multi-year campus upgrade cycle and increased AI contributions, with a price target raised to **$91** [34][37]. - **AXON** is projected to maintain a durable growth opportunity with a price target of **$713**, reflecting a strong market position in public safety [50][56]. - **MSI** was upgraded to OW with a price target of **$436**, citing reasonable valuation levels and growth drivers in public safety [60][71]. - **Ciena (CIEN)** is experiencing strong demand but is currently trading at a premium, leading to a cautious outlook despite positive near-term demand [72][74]. 7. Risks and Considerations - Risks include potential tariff impacts, macroeconomic uncertainties, and the timing of public safety spending [56][71]. - The optical component market faces challenges from increased competition and supply chain issues, which could affect pricing and margins [95][96]. Conclusion The conference call highlighted a robust outlook for the Telecom & Networking Equipment industry, driven by AI and optical components, while also emphasizing the need for selectivity in investments due to market dynamics and pricing pressures. The public safety sector remains a focal point for growth, with several companies positioned to capitalize on favorable funding and demand conditions.

Core Insights - The article highlights the author's strong passion for markets and investment research, emphasizing a focus on transformative technologies that can disrupt traditional markets [1] - The investment approach is centered around value investments with medium to long-term growth horizons, aiming for substantial upside while managing risk [1] - The author expresses a commitment to supporting everyday investors by providing high-quality insights that facilitate informed decision-making [1] Investment Strategy - The investment strategy is characterized by a value-oriented approach, focusing on identifying opportunities with significant growth potential [1] - The author has developed a deep understanding of various investment strategies over five years of market observation [1] - The emphasis is placed on medium to long-term growth horizons, indicating a preference for sustainable investment opportunities [1] Market Dynamics - There is a strong interest in understanding how global trends impact market dynamics and long-term investment opportunities [1] - The author aims to analyze transformative technologies across various sectors, indicating a broad industry-agnostic perspective [1] - Engagement with the Seeking Alpha community is highlighted as a means to share insights and enhance investment choices for others [1]

Summary of Key Points from the Conference Call Industry Overview - The conference attended was the European Conference on Optical Communications (ECOC) held in Copenhagen from September 28 to September 30, 2025, focusing on the Telecom & Networking Equipment industry [3][4]. Core Insights - **Demand for Optical Technologies**: The demand for optical transceivers has more than doubled in the last two years, with significant growth in the Data Center Interconnect (DCI) market, indicating a long runway for demand [4][7]. - **Innovation Focus**: The industry is shifting towards "blank page innovation" to address challenges, moving away from reliance on traditional telco budgets [4][7]. - **Investment in Optical Technologies**: Hyperscalers are willing to invest in optical technologies that enhance data transmission reliability and efficiency while reducing power consumption [4][7]. - **Emerging Technologies**: Key technologies discussed include Optical Circuit Switching (OCS), Co-Packaged Optics (CPO), and thin film lithium niobate (TFLN), with OCS gaining significant traction [7][9]. Company-Specific Insights - **Ciena Corporation (CIEN)**: - CIEN is optimistic about current demand, with over a year of visibility into demand. Their Direct Out-of-Band Management (DCOM) solution, co-developed with Meta, is expected to generate significant revenue [11][12]. - CIEN's valuation is around 22-23x FY26e EPS, reflecting strong positioning in the cloud market [20]. - **Coherent Corp (COHR)**: - COHR has faced supply issues due to an EML shortage but is adjusting build plans to meet increased demand. They are optimistic about future opportunities, particularly with OCS [13]. - The company trades at a discount compared to peers, presenting a potential opportunity if execution improves [13]. - **Lumentum Holdings Inc (LITE)**: - LITE is currently benefiting from OCS adoption, which could significantly impact their valuation positively [9][12]. Market Dynamics - **Pricing Environment**: There is currently no pricing pressure in the optical space, which typically sees annual price declines of 10-15%. The ability to increase prices is noted, but caution is advised if capital expenditure slows [8]. - **Upcoming Events**: The next significant event for the industry is the Open Compute Project (OCP) show scheduled for October 13-15, 2025, which may serve as a catalyst for further developments [8]. Risks and Considerations - **Supply Chain Constraints**: The ability of vendors to meet the high demand is a critical gating item for the industry [7]. - **Technological Adoption**: While OCS shows promise, its adoption may take time due to the complexity of the technology and the need for significant architectural changes [9]. - **Market Volatility**: Potential risks include macroeconomic headwinds, pricing pressures, and the impact of tariffs on gross margins [23][26]. Conclusion - The optical communications industry is experiencing robust demand driven by advancements in AI and data center needs. Companies like CIEN, COHR, and LITE are positioned to benefit from this trend, although they face challenges related to supply chain and technological adoption. The upcoming OCP show may provide further insights and opportunities for growth in this sector.

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Telecom & Networking Equipment in North America [1] Core Company Insights Lumentum Holdings Inc (LITE.O) - **Price Target Change**: Increased from $85.00 to $92.00 [2] - **Performance Expectations**: Anticipated a revenue beat of less than 2% and approximately 5% EPS increase for the upcoming quarter [16] - **Growth Drivers**: Recovery in telco and demand from Google and EMLs are expected to contribute positively [10] - **Long-term Targets**: No changes expected to long-term targets; however, upside potential exists due to strong demand in Cloud Light business [10] - **Revenue Estimates**: Expected revenue growth of $1,359 million in 2024, increasing to $2,511 million by 2027 [36] Coherent Corp (COHR.N) - **Price Target Change**: Increased from $92.00 to $97.00 [2] - **Performance Expectations**: Expected revenue beat of 2.5% to 4% and an EPS increase of 8% to 10% for the upcoming quarter [16] - **Growth Drivers**: Strength in datacom and telecom segments expected to drive revenue growth [10] - **Long-term Outlook**: Analyst Day laid out a roadmap, but near-term upside is needed to maintain momentum [10] - **Revenue Estimates**: Expected revenue growth of $5,779 million in 2025, increasing to $6,628 million by 2027 [57] Market Dynamics - **Cloud Capex Revisions**: Positive revisions in cloud capex are driving optimism in optical AI stocks, with expected growth of 54% in 2025 [4] - **Investor Sentiment**: Investors are favoring a pair trade strategy of long LITE and short COHR post-FQ4 prints, reflecting a preference for COHR due to its better positioning [4][7] - **Multiple Expansion**: Current multiples are hovering around one-year averages, indicating limited opportunity for further expansion in the near term [4] Risks and Considerations - **Tariff Impacts**: Tariffs are expected to materially limit earnings and multiple in the near term, particularly affecting gross margins [34][43] - **Market Volatility**: The volatility in end markets and uncertainty around AI spending may cap the multiples for both companies [43][49] - **Operational Challenges**: COHR faces challenges in executing its vision laid out during the Analyst Day, which could limit changes to its margin profile [49] Additional Insights - **Investor Feedback**: Investors are generally optimistic about the recovery in telco and the potential for both companies to outperform in the upcoming quarter [4][10] - **Long-term Growth Opportunities**: Both companies are positioned to benefit from secular growth trends in AI and datacom, although challenges remain in the industrial and consumer electronics markets [49][62] This summary encapsulates the key points discussed in the conference call, focusing on the performance expectations, market dynamics, and potential risks associated with Lumentum Holdings Inc and Coherent Corp.