Wall Street's Interpretation of the US Optoelectronic Module Ban: A direct benefit to domestic optical communication, but may be difficult to implement directly

BlockBeats News, August 5th. The news that the United States plans to restrict the import of Chinese AI data center optical components is becoming the new main theme of the optical module sector.

Overnight, U.S. stocks responded first. Stimulated by the relevant news, optical communication targets such as Marvell, Coherent, Lumentum, Applied Optoelectronics, and Corning collectively surged, with funds quickly flowing into the U.S. domestic optical communication supply chain. Today, A-share optical module companies are under pressure, with companies such as Acacia, Neophotonics, and FiberHome Technologies related to the North American AI supply chain becoming the market's focus.

The latest views on Wall Street are also starting to diverge. Both Morgan Stanley and Citigroup released brief comments on August 4th, but the emphasis of the two is not the same.

Morgan Stanley emphasizes the benefits to the U.S. optical communication supply chain. They believe that if the U.S. eventually restricts Chinese optical transceivers from entering the AI data center supply chain, non-Chinese suppliers will have the opportunity to gain market share, with Coherent being the clearest beneficiary. AAOI and Fabrinet are also expected to take on some of the incremental demand. Lumentum's logic is relatively indirect, mainly stemming from the possibility of an extended EML laser supply tightness cycle and the market's previous concerns about supply easing and margin pressure potentially being postponed.

However, Morgan Stanley also acknowledges that the implementation of a ban will be very challenging. Current non-Chinese supplier capacity is insufficient to meet AI capital expenditure requirements, and key materials such as upstream InP substrates still have Chinese supply chain involvement. If the U.S. restricts Chinese optical modules, China may also retaliate in the key materials segment. Morgan Stanley even mentioned that a potential solution could be for Chinese cloud providers to increase purchases of American optical communication components.

Citigroup's judgment is more cautious. They believe that this potential ban is unlikely to become a simple, clear-cut rule. Seven of the top ten optical transceiver companies globally are Chinese enterprises, supplying over 50% of high-speed optical modules to major U.S. cloud providers; at the same time, the AI optical module supply chain is still tight, with Chinese manufacturers having cost, product iteration, and delivery capabilities advantages. Citigroup expects that, under real supply and demand constraints, the policy will likely include certain exemptions.

Regarding Chinese targets, Citigroup's impact ranking is as follows: FiberHome Technologies is most indirectly affected, Accelink Technologies is in the middle, and Neophotonics is more directly impacted. FiberHome Technologies is mainly a passive device supplier, with overseas optical module companies as direct customers, so the short-term impact is controllable; Neophotonics, on the other hand, has about 88% of its revenue coming from Thailand by 2025, providing overseas production capacity buffers. What truly needs to be guarded against is whether U.S. policies will further cover Chinese background companies' capacities in third countries.

This also explains the market's division: U.S. stock trading orders are shifting in anticipation, while A-share trading is considering North American customer compliance risks and valuation discounts.

Based on two reports, there is currently a clear consensus on Wall Street: if the ban is implemented, it will have a short-term positive impact on the valuation of the US optical communication chain. The disagreement lies in whether the order migration can proceed smoothly. AI data center construction is still accelerating, and cloud providers require a stable, low-cost, high-speed supply chain. Policy can alter expectations, but capacity, certification, yield, and material supply will determine the final outcome.

For the optical module sector, the market is now focused not only on the ban's headlines but also on three key points: whether the final rule will cover third-country capacity, whether North American cloud providers will reallocate orders, and whether Chinese suppliers' overseas factories can continue to act as a buffer.