Investment Rating - The report assigns an "Overweight" rating for the industry [5]. Core Insights - Optical interconnection is a high-slope direction for AI infrastructure, with demand focusing on Scale out scenarios and rate iterations from 2023 to 2025. Starting in 2026, the demand for Scale out scenarios is expected to maintain a high growth rate. The penetration of optical interconnection in Scale up scenarios through CPO/NPO forms is opening new incremental markets, with the value proportion of optical interconnection in AI clusters expected to continue rising [5][8]. - 2026 is anticipated to be a year of explosive growth for existing scenarios and products, alongside the mass production of new scenarios and products. High-barrier segments and companies are expected to continue benefiting [5][8]. Summary by Sections Investment Highlights - The industry holding ratio is increasing, with valuations at a historically high level, reflecting upward expectations driven by the AI industry chain [32]. - AI is driving network upgrades, with strong overseas demand, and domestic core enterprises are fully benefiting from the global infrastructure wave [33]. - A new generation of computing infrastructure is emerging in China, ushering in a new cycle for the domestic industrial chain [34]. - New connections are expected to bring about a pivotal moment in industry development in 2026, creating more investment opportunities [35]. Industry News - AOI has secured over $53 million in orders for 800G transceivers shortly after a $200 million order for 1.6T products, with deliveries expected in Q2 [10]. - Lumentum is establishing a new InP chip factory in North Carolina, expected to start mass production in mid-2028, with Nvidia as a customer [11]. - Lightstorm and Ciena have completed a fourfold upgrade of the JGA submarine cable system, enhancing capacity from 100Gbps to 400Gbps [12]. - Suzhou Star Key Photon Technology has commenced construction of China's first silicon photonic Foundry platform, aiming to reduce reliance on foreign supply chains [13]. - Molex has launched an integrated optical interconnect solution and high-basis OCS platform to support large-scale AI network deployments [14][15].

Core Insights - The report expresses an optimistic outlook on Google's AI-related business, highlighting that capital expenditures (CapEx) exceeded expectations, indicating a vast market potential for future optical interconnects [2] - Coherent's financial report suggests that the "Scale-Out" strategy requires large-scale use of pluggable optical modules, while the "Scale-Up" strategy represents a growth market for CPO/NPO [2] - The report continues to recommend the optical module sector, which combines favorable market conditions with strong fundamentals [2] Industry Overview - In July 2024, the Central Committee of the Communist Party of China and the State Council issued opinions to accelerate the comprehensive green transformation of economic and social development, setting major targets for 2030 and 2035 [2] - The 14th Five-Year Plan emphasizes the acceleration of green transformation as one of the seven main goals for economic and social development during this period [2] - Recent overseas power shortages, such as the nationwide blackout in Spain and Portugal affecting over 50 million people, highlight the urgent demand for energy security, creating new opportunities for green energy development [2]