Investment Rating - The report maintains an "Overweight" rating for the communication industry and communication equipment manufacturing sector [9]. Core Insights - The G.652.D single-mode fiber price in China reached a nearly seven-year high of over 35 yuan per core kilometer in January 2026, driven by significant changes in supply and demand dynamics [1][2][13]. - Demand for optical fibers is surging due to global AI data centers and military applications, with a notable $6 billion contract signed between Meta and Corning for AI data center cabling [2][15]. - Supply constraints are expected as the production capacity of upstream optical fiber preform materials cannot be quickly adjusted, leading to sustained high prices for optical fibers [20][22]. Summary by Sections Market Overview - The communication index rose by 5.83% last week, while the Shanghai Composite Index fell by 0.44% and the Shenzhen Component Index dropped by 1.62% [1][13]. - The price increase of G.652.D single-mode fiber reflects a significant market shift, with a 75% increase in January alone [14]. Demand Drivers - The demand surge is primarily attributed to AI data centers and military applications, particularly FPV drones, which require high-performance optical fibers [15][19]. - The contract between Meta and Corning exemplifies the strong demand from AI data centers, with the order size comparable to Corning's entire revenue from optical communications in 2025 [15]. Supply Constraints - The global supply of optical fiber preform is nearing full capacity, with major manufacturers operating at high utilization rates [20]. - The expansion cycle for preform production is lengthy, indicating that supply shortages may persist, supporting high optical fiber prices [20][22]. Investment Opportunities - The report suggests focusing on the optical fiber and cable sector for potential earnings growth and valuation recovery, as price increases are expected to enhance profitability for leading manufacturers [22]. - Key recommended companies include ZTE Corporation, Walden Material, China Mobile, Ruijie Networks, Xinyi Technology, and Zhongji Xuchuang, all rated as "Buy" or "Overweight" [9][60].