China Galaxy Securities: During the Spring Festival, the development of the domestic and international communication industry technology and application is advancing, and the demand for inference computational resources urgently needs to be expanded.

China Galaxy Securities released a research report stating that the demand for reasoning computing power resources urgently needs to expand, and the computing power industry is still in a high boom cycle. During the Spring Festival, the domestic communication industry developed comprehensively, marking the beginning of the "15th Five-Year Plan." The introduction of 5G-A empowered the Spring Festival Gala in the Year of the Horse, activating the three core capabilities of 5G-A (UCBC, RTBC, HCS), supporting the transmission of ultra-high-definition materials, cross-venue interaction among actors, and ensuring safety in the low-altitude airspace of sub-venues. Combining the development of computing power applications during the Spring Festival and the capital expenditure plans for 2026 by overseas cloud service providers before the Spring Festival, as well as the order situation in the optical communication industry chain, the computing power industry is still in a high boom cycle. The optical communication industry chain in China actively resumed production during the Spring Festival, and the short-term impact of the holiday on order fulfillment is expected to be minimal. The cooperation between META and NVIDIA is expected to accelerate the popularization of CPO. Key points from China Galaxy Securities include: - During the Spring Festival, the development of technology and applications in the domestic and international communication industries progressed together. Key events focused on new productive forces in the industry chain. - Domestically, the Year of the Ox marked the beginning of the "15th Five-Year Plan," and 5G-A empowered the Spring Festival Gala, activating the three core capabilities of 5G-A. China Satellite Communications, together with Sichuan Airlines and CCTV News, successfully achieved real-time broadcasting of the Spring Festival Gala from an altitude of 10,000 meters using Ka broadband satellite technology for the first time. The interconnection of low-orbit satellite internet continued to improve efficiency and reduce costs. In terms of 6G, Peking University and other units, in collaboration with the Peng Cheng Laboratory, achieved the seamless integration of fiber optic communication and wireless communication systems internationally, laying the foundation for scenarios such as 6G base stations and wireless data centers. With strong demand driving core optical communication companies, they operated at nearly full capacity during the Spring Festival, with robust order backlogs. - Internationally, STMicroelectronics announced a collaboration with AWS to launch a new photon chip for AI data centers. The chip aims to increase the speed of optical transceivers and reduce power consumption by up to 60%. META signed a multi-year cooperation agreement with NVIDIA to deploy NVIDIA CPUs and millions of Blackwell and Rubin GPUs on a large scale, as well as integrate the NVIDIA Spectrum-X Ethernet switch into the Facebook Open Exchange System platform. Data center construction in the United States continued to progress, with OpenAI and SoftBank jointly investing $1 billion from SB Energy for large-scale data center construction in the United States. xAI announced the construction of the MACROHARDRR data center in Mississippi, with a total investment scale of approximately $2 billion. The demand for reasoning computing power resources urgently needs to expand, and the computing power industry is still in a high boom cycle. During the Spring Festival, the domestic communication industry developed comprehensively, with 5G-A, satellite internet, 6G, and the optical communication industry experiencing minimal impact from the holiday. Companies in the AI application sector such as KNOWLEDGE ATLAS seeking computing power partners and Douyin suspending video calling services on February 16th indicate the current shortage of computing power. The continuous development of AI applications is driving the continuous growth of computing power. Internationally, news mainly focused on data center construction and the roadmaps for GPUs and XPUs. NVIDIA's current leading position in the industry remains stable, and the acquisition of Groq technology agreements further strengthens its position in the inference hardware market. Market concerns about the communication industry before the holiday mainly revolve around the pace of resuming work and production in the first quarter of optical communication-related companies in China, as well as the capital expenditure and CPO landing rhythm of the computing power industry in 2027. Considering the development of computing power applications during the Spring Festival and the capital expenditure plans for 2026 by overseas cloud service providers before the Spring Festival, as well as the order situation in the optical communication industry chain, the computing power industry is still in a high boom cycle. The optical communication industry chain in China actively resumed production during the Spring Festival, and the short-term impact of the holiday on order fulfillment is expected to be minimal. The cooperation between META and NVIDIA is expected to accelerate the popularization of CPO. Risk factors include the uncertainty of the international situation, increased competition in the computing power industry, and the risk of continued tight supply leading to order overflow.