The optical sector appears to be regaining its luster. Over the nine trading days since August, the highly anticipated ChiNext AI ETF Huabao (159363) has recorded seven consecutive bullish sessions. Three leading overseas companies—Tower, Lumentum, and Coherent—have recently released their earnings reports, revealing strong revenue growth, expanding gross margins, and order books stretching into 2027 and beyond. The momentum in optical modules is transitioning from mere expectation to tangible results on financial statements.
Key Insights from the Financial Reports of the Three Overseas Giants
Optical modules serve as the crucial neural pathways in AI data centers, with a distinct value chain divided into upstream (materials, chips, and foundry services), midstream (optical modules, CPO, and NPO technologies), and downstream (AI clusters from North American cloud providers). The three overseas leaders—Tower, Lumentum, and Coherent—each occupy different segments of this chain. Despite their unique business models, their latest earnings reports convey a highly consistent message: demand is accelerating, supply capacity is struggling to keep pace, and orders are already secured well into the post-2027 period. The synchronized upward trajectory of their performance serves as a direct reflection of the robust health of A-share optical module companies.
Tower Semiconductor—an upstream silicon photonics foundry service provider—reported Q2 2026 revenue of $6 billion, a 23.7% year-over-year increase. Its silicon photonics (SiPho) revenue surged by 270% year-over-year, reaching an annualized run rate of over $680 million. The company aims to achieve a $1 billion run rate by Q4 2026. CEO Russell Ellwanger stated that AI-driven optical demand is accelerating, not slowing. Signed customer contracts already correspond to approximately $1.3 billion in silicon photonics revenue for 2027, with the 2028 model revised upward to $3.6 billion. The fact that foundry capacity is being locked in years in advance by module manufacturers, with prepayments already received, indicates that midstream module demand is exceptionally strong. This fundamentally confirms the high utilization rates and order visibility for A-share leaders like Zhongji Innolight and Eoptolink Technology.
Lumentum, a leader in light sources now expanding into modules, reported Q4 FY2026 revenue of $1 billion, a roughly 110% year-over-year increase, with non-GAAP EPS of $3.23. Its guidance for Q1 FY2027 is $12.25–$12.75 billion, reaching its target model one quarter ahead of schedule. Growth drivers include its 6T cloud modules, OCS optical circuit switches, ultra-high-power lasers for CPO, and collaborations with multiple customers on NPO projects. The company expects EML laser shipments to grow by more than 50% year-over-year in Q4 2026. The persistent shortage of upstream components like lasers and EMLs directly mirrors the strong demand conditions for A-share component companies, such as Tianfu Communication.
Coherent, a full-stack photonics integrator, reported Q4 FY2026 revenue of $1.5 billion, a 34% increase, with GAAP and non-GAAP gross margins of 38.5% and 40.2%, respectively, and non-GAAP EPS of $1.74. Full-year revenue reached a record $71.2 billion. Guidance for Q1 FY2027 is $2.2–$2.4 billion. In the June quarter, indium phosphide (InP) laser production increased by 80% year-over-year. The company plans to double its InP output capacity this quarter and aims to more than double it again by the end of the next calendar year. The fact that even a full-stack leader is constrained by InP capacity bottlenecks underscores that demand far outstrips supply, confirming the structural and genuine nature of the industry's strength.
These three leading companies, covering the foundry, light source, and full-stack integration segments, each face capacity limitations and have consistently raised their guidance. Together, they paint a comprehensive picture of the industry: the generational upgrade from 800G to 1.6T is just the beginning. The replacement of copper with optical interconnects and the increasing penetration of CPO/NPO technologies are opening up long-term demand, while supply-side constraints are likely to prolong the industry's growth cycle longer than the market currently anticipates.
Overseas Confidence in the Optical Sector
Three clear signals from industry, capital markets, and top-tier institutions collectively highlight strong overseas confidence in China's optical communication sector. First, industry data confirms robust demand. During its earnings call, Coherent addressed recent reports regarding FCC-related matters, stating they are currently speculative. Following news of potential US import restrictions on optical modules, customers proactively engaged with the company to discuss manufacturing solutions, generating new demand discussions. The company noted that its capacity for fiscal year 2027 is nearly fully booked, with customers already placing orders for 2028. Demand for next-generation technologies like CPO is not only undiminished but is accelerating.
Second, Wall Street has, for the first time, created a dedicated investment tool for the optical sector. On August 6, Roundhill Investments, which previously launched the "Magnificent Seven" ETF, introduced a new fund (ticker: LYTE). Chinese companies comprise half of its top ten holdings, with Eoptolink Technology and Zhongji Innolight together accounting for a combined weight of 46.87%, clearly signaling a bet on the optical interconnect upgrade cycle in the AI era.
Third, major institutions have significantly increased their stakes in Zhongji Innolight. According to disclosures from the Hong Kong Stock Exchange, Goldman Sachs has recently been raising its long position in Zhongji Innolight's H-shares. As of August 3, 2026, Goldman Sachs' stake rose from 5.95% to 12.19% within a few days, while JPMorgan Chase increased its position from 5.6% to 13.72%. The contrarian increasing of stakes by these two Wall Street giants reflects a strategic allocation to the earnings certainty of optical module leaders.
These three signals converge on a single conclusion: the industry's transition from electrical interconnects to optical interconnects in AI clusters is irreversible. Leading companies, with their technological barriers and locked-in order books, are well-positioned to benefit. Wall Street has now recognized optical technology as a standalone long-term investment theme, while top institutions are betting on its earnings resilience amidst geopolitical uncertainties. Optical communication has evolved from a supporting role in computing to a fundamental pillar of computing expansion. There is a strong consensus on this within the overseas industry and capital markets.
Related Investment Product
The ChiNext AI ETF Huabao (159363) focuses on optical module CPO leaders while also considering AI applications. The target index has a combined weight of approximately 40% from Zhongji Innolight, Eoptolink Technology, and Tianfu Communication, positioning it as a core play in the AI computing power sector. The fund has a total net asset value exceeding ￥7 billion and an average daily trading volume of over ￥1 billion in the past six months, making it the largest and most liquid among the 8 ETFs tracking the same index. OTC link funds are available: Class A (023407) and Class C (023408).
Beyond the computing power segments like optical modules, the AI trading theme also warrants attention on AI applications. Referencing the US SaaS benchmark, Palantir's quarterly results exceeded expectations, with the market awarding a high premium to companies demonstrating successful AI application deployment. The ChiNext AI index aggregates a significant number of companies that combine software and hardware, including vertical industry applications. Compared to pure hardware-focused communication companies, these firms are better positioned to benefit from the dual catalysts of earnings realization from applications and a revaluation of their business models.
Data source: Shenzhen and Shanghai Stock Exchanges, Wind, etc., as of August 13, 2026. Reminder: Market volatility may be significant recently, and short-term gains or losses do not predict future performance. Investors must make rational decisions based on their own financial situation and risk tolerance, paying close attention to position and risk management. For ETF fund expense details: investors may be charged a commission of up to 0.5% by the subscription/redemption agent. On-exchange trading fees are as charged by the securities company, with no sales service fee. For the linked fund, Class C shares have no subscription fee; redemption fee is 1.5% for holding periods under 7 days and 0% for 7 days or more; the sales service fee is 0.3%. For Class A shares, the subscription fee is 1% for amounts under ￥1 million, 0.6% for amounts between ￥1 million and ￥2 million, and ￥1,000 per transaction for amounts over ￥2 million; redemption fee is 1.5% for holding periods under 7 days and 0% for 7 days or more; no sales service fee is charged. Risk Disclosure: The ChiNext AI ETF Huabao passively tracks the ChiNext AI Index. The index's base date is December 28, 2018, and its launch date is July 11, 2024. Its annual returns from 2021 to 2025 are: 17.57%, -34.52%, 47.83%, 38.44%, and 106.35%, with annualized volatility of 23.73%, 27.34%, 38.02%, 45.42%, and 41.1% for the same periods. Index constituent stocks are adjusted according to the index compilation rules. Its historical back-tested performance is not indicative of future index performance. The constituent stocks mentioned are for illustrative purposes only and do not constitute investment advice, nor do they represent the holdings or trading activity of any fund managed by the fund manager. According to the fund manager's assessment, the ChiNext AI ETF Huabao is rated as R4 (medium-high risk), suitable for investors with a proactive (C4) risk profile or higher. Please refer to the sales institution for suitability matching advice. Any information in this article (including but not limited to stocks, comments, forecasts, charts, indicators, theories, or any form of expression) is for reference only. Investors must take full responsibility for their own investment decisions. Furthermore, any views, analysis, or forecasts in this article do not constitute investment advice to readers. The fund manager is not liable for any direct or indirect losses arising from the use of this article. Fund investment involves risk. Past performance of a fund does not guarantee future results. The performance of other funds managed by the same fund manager does not guarantee the performance of this fund. Invest with caution.
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