GF SEC: Policy risks in the optical interconnect industry chain are further reduced; bullish on leading domestic laser companies breaking through overseas.

GF SEC released a research report stating that it continues to be bullish on leading companies in the optical interconnect sector. The US OCP conference in mid-October is expected to continue releasing positive news about cloud vendors' in-house developed industry chains, and combined with the strong growth expectations in the third-quarter reports of leading companies, the bank believes that the optical interconnect sector will continue to perform well in October, with focus on large-cap leading companies and small-cap elastic directions supported by earnings. GF SEC's main views are as follows: Policy risks in the optical module industry are further reduced Recently, multiple industry organizations have expressed their positions on the FCC's expansion of controls to the component level, with the majority opposing it. ITI (Information Technology Industry Council) explicitly opposes including optical modules in the Covered List; TIA (Telecommunications Industry Association) opposes the FCC expanding the scope of the Covered List to components, believing that a broad extension would disrupt the global communications supply chain and create compliance uncertainty; CTA (Consumer Technology Association) stated that FCC regulation must adhere to risk-oriented, precisely targeted principles, and cannot apply a one-size-fits-all approach to categories; components cannot be arbitrarily included in restricted lists. In addition, the US government has recently, on the issue of whether to put the brakes on frontier AI models, continued its policy tendency of supporting accelerated AI construction and expressing concern about delaying US AI construction. This policy tendency also makes government departments more cautious when introducing restrictive policies in certain areas. Upstream materials still have tight links, and leading domestic laser manufacturers are expected to achieve breakthroughs in overseas markets through globalized layout If the policy risks in the optical module segment are decreasing, upstream key components will also benefit, especially leading domestic companies. Taking lasers as an example, (1) the current expansion progress of overseas laser companies is far below the growth in demand, and there will be a huge gap in high-end laser supply in the coming years; (2) leading domestic companies have been strengthening their globalized layout to reduce potential future supply risks; (3) North American CSPs value supply chain risks and will conduct various simulations and responses. The current cooperation between CSPs and leading Chinese laser companies indicates that CSPs judge overall supply chain risks to be controllable. Risk warnings The risk of AI infrastructure construction falling short of expectations; the risk of AI application development falling short of expectations; the risk of changes in import and export policies in the AI field; the risk of reduced international cooperation.