Summary of Key Points from Conference Call Industry Overview - The optical chip core substrate demand is expected to surge, with an annual growth rate projected to reach 20 times by 2030 compared to 2026, driven by new technologies such as CDUP, NPO, OCS, and spatial optical fibers, which will enhance the performance and valuation of the optical communication industry [1][2][24] - The optical communication industry is currently experiencing rapid growth, particularly in overseas markets, with significant increases in production capacity and sales of optical modules, although delivery is constrained by a shortage of optical chips [2] Technological Advancements - Significant progress in high-speed interconnect technologies is noted, with NVIDIA's NVLink switch market expected to surpass Ethernet by 2027, and Google implementing ASIC and 3D network topologies through ICI technology [1][3][4] - The demand for high-speed copper cables is robust, with Corning reporting over 270% year-on-year revenue growth in FY26 Q2, driven by North American Hyper Scalers transitioning from 25G to 100G and potentially to 200G [3][11] Open Ecosystem and Industry Collaboration - The UA Link alliance is accelerating the industrialization of high-speed interconnects, with participation from major companies like AMD, Broadcom, Cisco, and Google, and the release of new Ultra switch chips by Broadcom to expedite commercialization [1][5] - Collaboration between network-side and computing-side companies is deepening, with Ruijie Networks and Broadcom working closely to launch FreeUP cabinet-level products starting in 2026 [1][8] Domestic Market Developments - Domestic SKOP industrialization is advancing rapidly, with Huawei establishing Scaler data center clusters and major internet companies like Alibaba, ByteDance, and Tencent implementing their Scap interconnect technology solutions, expected to enter mass production by 2026 [1][6][7] - Ruijie Networks is positioned to play a significant role in the future SKOP market, with an increasing share in internet data centers and expected growth driven by rising capital expenditure [1][7] Future Trends and Opportunities - The AI era is expected to significantly impact the optical interconnect market, with increasing bandwidth requirements leading to a surge in demand for optical modules, PCBs, and related equipment [15][16] - The optical interconnect industry is anticipated to enter a new phase starting in the second half of 2026, benefiting various sectors including traditional optical devices, chips, and the entire optical module supply chain [24] Innovations in Data Center Networking - Google is innovating its data center network architecture, planning to expand from 8,000 to 16,000 interconnected cards, utilizing high bandwidth to enhance performance [17][18] - Domestic companies like Huawei and Alibaba are also making strides in data center networking, with architectures that transition from copper to optical connections for improved efficiency [18][19] Global Competitive Landscape - Global giants like Broadcom are launching significant solutions for scale-up scenarios, including the Tomahawk Ultra chip, which is designed to capture the scale-out interconnect market [22] - Domestic module manufacturers are actively proposing solutions for scale-up scenarios, emphasizing the advantages of MPO technology for higher density interconnections [21] Conclusion - The optical communication and high-speed interconnect industries are poised for substantial growth driven by technological advancements, collaborative ecosystems, and increasing demand from AI and data center applications, presenting numerous investment opportunities and potential risks in the evolving landscape [1][24]

Investment Rating - The report maintains a "Buy" rating for key companies in the computing power industry chain, specifically recommending leading companies in the optical module sector such as Zhongji Xuchuang and Xinyi Sheng [3][8][26]. Core Insights - The computing power industry is experiencing a significant surge, driven by multiple factors including the strong performance of major companies like Nvidia, which has reached a market capitalization of $4.2 trillion, and the projected capital expenditures (Capex) of over $300 billion by major cloud service providers (CSPs) in 2025 [1][21]. - The report identifies four key milestones in AI technology that are reshaping market perceptions, including the upcoming release of GPT-5, which will support multi-modal inputs, and the introduction of advanced chips like Broadcom's Tomahawk Ultra [2][22]. - There is a growing recognition of the rigid demand for computing power, with significant investments and user willingness to pay for AI services, indicating a robust market outlook despite concerns about Capex sustainability and ROI [3][27]. Summary by Sections Market Dynamics - The computing power sector has seen explosive growth, with Zhongji Xuchuang's market value surpassing 200 billion yuan and Xinyi Sheng achieving a 39% weekly increase in market value [1][16]. - The optical communication index has outperformed other sectors, with a 16.9% increase, reflecting strong investor sentiment and performance in the optical module market [17][20]. Key Milestones - AI technology is transitioning towards multi-modal capabilities, with significant hardware upgrades and increased penetration rates [2][22]. - Major CSPs have revised their Capex expectations upwards, confirming the high demand for computing power [22]. Investment Opportunities - The report emphasizes the importance of the optical communication sector as a critical component of AI infrastructure, suggesting that companies like Zhongji Xuchuang and Xinyi Sheng will benefit from this trend [8][26]. - It also highlights the potential of domestic computing power supply chains, particularly in liquid cooling technologies [26][27]. Company Performance - Zhongji Xuchuang and Xinyi Sheng are highlighted as key players, with projected earnings per share (EPS) growth and favorable price-to-earnings (PE) ratios indicating strong future performance [11][14]. - The report notes that the market is shifting towards value investment in high-performing companies, moving away from high-risk classifications [25].