Central China Securities: North American Cloud Providers Continue Raising Capex; Silicon Photonics Boosts AI Network Expansion

Stock News11-14

North America's four major cloud providers reported combined capital expenditures of $112.4 billion in Q3 2025, marking a 76.9% YoY increase, according to a research note by Central China Securities. CignalAI projects the data center optical component market to grow over 60% in 2025, driven by strong demand for 400G/800G products.

AI development is accelerating large-scale data center construction, sustaining steady demand for optical components. Higher reliability requirements and shorter iteration cycles for optical modules have raised industry barriers, further consolidating leading manufacturers' advantages. Supply of high-speed optical chips remains tight, prompting global vendors to expand capacity and upgrade processes.

**Key Insights:** 1. **Telecom Sector Recovery**: China's telecom revenue reached ¥1.33 trillion in Jan-Sep 2025 (+0.9% YoY). 5G users accounted for 63.9% of total mobile subscriptions by September, with average data usage per household hitting 21.23GB/month (+15.5% YoY). Gigabit broadband penetration rose to 33.9%. Operators are integrating cloud-network solutions with industrial, healthcare, and energy sectors to deepen digital-real economy convergence.

2. **AI Smartphone Momentum**: Global smartphone shipments grew 3% YoY to 320.1 million units in Q3 2025. Canalys forecasts AI phone adoption to hit 34% in 2025, fueled by streamlined on-device models and upgraded chip capabilities. New mid-range SoCs like Snapdragon 8s Gen 4 and Dimensity 9400e now support large on-device models efficiently, accelerating AI phone penetration.

3. **Optical Module Trade**: China’s September optical module exports rose 17.1% MoM, with Thailand’s communications equipment exports surging 123.4% YoY. Regional highlights include Sichuan (+76% MoM), Hubei (+86.6% MoM), and Shanghai (+282.9% MoM).

4. **Silicon Photonics Growth**: Yole Group estimates the silicon photonics market will expand from $278 million in 2024 to $2.7 billion by 2030 (46% CAGR), enabling scalable AI network bandwidth breakthroughs.

**Investment Recommendations**: - **Optical Communication**: Focus on leaders like **Eoptolink (300502.SZ)**, **Accelink (002281.SZ)**, and **HGTECH (000988.SZ)** amid rising data center demand. - **AI Phones**: **ZTE (000063.SZ)** and **Sunway Communication (300136.SZ)** may benefit from premiumization and ASP growth. - **Telecom Operators**: **China Mobile (600941.SH)**, **China Unicom (600050.SH)**, and **China Telecom (601728.SH)** offer high-dividend appeal with eSIM and AI-driven business model upgrades.

**Risks**: Trade disputes, supply chain disruptions, slower-than-expected capex or AI adoption, and intensified competition.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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