Core Viewpoint - Morgan Stanley believes that the positive fundamentals of the optical module industry have largely been reflected in stock prices after several months of significant increases, leading to rating adjustments for multiple related stocks [1][2]. Group 1: Market Sentiment and Stock Performance - Morgan Stanley suggests that investors should take profits during periods of high market sentiment, as the positive fundamentals are widely recognized and reflected in stock prices [2]. - Since April, stock price increases have been substantial: New Yisheng up 460%, Zhongji Xuchuang up 312%, Tianfu Communication up 269%, and Huagong Technology up 62% [4]. Group 2: Rating Adjustments and Valuation Concerns - Morgan Stanley has made significant rating adjustments, notably downgrading New Yisheng to "Underweight," citing a potential slowdown in growth after a 338% year-on-year performance increase in Q2 2025 [3][10]. - The firm warns that the current valuations of New Yisheng and Tianfu Communication have exceeded historical averages, indicating that the positive fundamentals may have already been partially digested [7]. - The forward P/E ratio for Zhongji Xuchuang has risen from 14x to 24x, while New Yisheng's has increased from 8x to 20x since the beginning of 2025 [7]. Group 3: Future Growth Catalysts - Morgan Stanley views the rapid rollout of 1.6T products as a potential catalyst for growth in the second half of 2025 and 2026, despite delays in the GB300's launch affecting the timeline for 1.6T module shipments [13]. - The demand for 800G modules is expected to remain strong, which will help offset pricing and sales pressures on lower-end optical modules [13].