Core Viewpoint - The A-share market is experiencing a surge, leading to concerns about potential overvaluation in AI-related stocks, particularly in the optical module sector, represented by companies like New Yisheng, Zhongji Xuchuang, and Tianfu Communication [1][2][50]. Group 1: Market Trends - The rapid development of AI is expected to increase the demand for optical modules and drive upgrades towards higher transmission rates [5][6]. - The competition in AI computing not only focuses on GPU capabilities but also on data transmission efficiency, where optical modules play a crucial role [7][8]. - The optical module sector is witnessing a significant increase in both demand and iteration speed, with a shift from 400Gb/s to 800Gb/s modules already impacting company performance [12][14]. Group 2: Financial Performance - In the first half of 2025, New Yisheng reported a revenue of 10.44 billion, a year-on-year increase of 282.64%, while Zhongji Xuchuang's revenue was 14.79 billion, up 36.95% [13]. - The gross margins for these companies have improved, reflecting the successful rollout of high-end products like the 800G optical modules [12][13]. - The expected market size for 800G and 1.6T optical modules is projected to exceed $22 billion by 2030, driven by increased capital expenditure from key clients [15]. Group 3: Valuation Insights - Morgan Stanley has downgraded the ratings for New Yisheng and Tianfu Communication, citing that their valuations have reached historical highs [2][3]. - The dynamic price-to-earnings ratios for Zhongji Xuchuang, New Yisheng, and Tianfu Communication are currently at 34.71, 30.66, and 48.04, respectively, with a reasonable P/E range suggested to be between 30-40 times [31][32]. - The influx of capital into the A-share market and the potential for higher valuations due to improved liquidity are factors that could influence the stock prices of these companies [34][35]. Group 4: Investment Strategies - For investors already holding shares in these high-flying stocks, a strategy of locking in profits through gradual selling is recommended [39][40]. - New investors are advised to wait for significant price corrections before entering the market, as chasing high prices can lead to losses [46][50]. - The overall sentiment suggests that while there may be some bubble characteristics in these stocks, continued interest and investment in AI infrastructure could sustain their valuations [50][51].

Core Viewpoint - The article discusses the current state of the A-share market, particularly focusing on the "Yizhongtian" stocks, which are heavily influenced by AI computing power and have seen significant price increases. The article raises questions about whether these stocks are overvalued or undervalued and how investors should respond to the high valuations [1][2]. Industry Trends - The competition in AI computing power is not only about GPU capabilities but also about data transmission efficiency, where optical modules play a crucial role. The article compares GPUs to top chefs and optical modules to waitstaff, emphasizing the importance of efficient data transfer [2]. - The demand for optical modules is expected to rise due to the rapid development of AI, leading to upgrades in transmission speeds. The transition from 400Gb/s to 800Gb/s optical modules is already reflected in the performance of "Yizhongtian" stocks [3][5]. Performance Metrics - In the first half of 2025, the revenue and profit growth of key companies in the optical module sector were significant. For instance, Xinyi Sheng reported a revenue of 10.44 billion yuan, a year-on-year increase of 282.64%, while Zhongji Xuchuang's revenue was 14.79 billion yuan, up 36.95% [4]. - The sales volume of optical modules also showed strong growth, with Zhongji Xuchuang selling 9.05 million units, a 45.96% increase, and Xinyi Sheng selling 6.95 million units, a 112.53% increase [9]. Capital Expenditure Trends - Major tech companies are significantly increasing their capital expenditures, with a 69% year-on-year increase in Q2 2025, totaling $87.4 billion. This trend is expected to continue, with projected capital expenditures for major cloud providers reaching $333.8 billion in 2025 [10][11]. - Chinese internet giants are also ramping up their capital expenditures, with a 99.38% year-on-year increase in Q1 2025, totaling 55.01 billion yuan [11]. Future Projections - The market for 800G and 1.6T optical modules is expected to grow rapidly, with predictions indicating that the overall market size will exceed $22 billion by 2030 [5]. - By 2026, the performance of 1.6T optical modules is anticipated to start reflecting in the financial results of companies in the sector [8]. Valuation Considerations - Analysts have incorporated the expected performance from 1.6T optical modules and increased capital expenditures into their 2026 earnings forecasts, predicting significant profit growth for companies like Zhongji Xuchuang and Xinyi Sheng [16]. - The article suggests that the current market environment may allow for higher valuations, with a reasonable price-to-earnings (P/E) ratio for "Yizhongtian" stocks estimated between 30-40 times, potentially increasing to 40-50 times if liquidity improves [18][19].