The optical communications sector declined against the broader market trend. At the time of writing, TIME INTERCON (01729) was down 5.64% to HKD 15.9; CIG (06166) fell 5.56% to HKD 86.65; and YOFC (06869) dropped 3.39% to HKD 49.32. Overnight, the U.S. optical communications stock Lumentum plunged over 7%, negatively impacting market sentiment for the sector today. However, a recent research report from SDIC Securities pointed out that the optical module market could see AI-driven demand expansion and high-end structural volume growth in 2026: a new wave of AI computing infrastructure construction is driving strong demand for high-speed optical modules. It is projected that global capital expenditure by cloud providers will continue its upward trajectory in 2026, coupled with the expansion of AI clusters, the volume release of next-generation computing platforms, and the implementation of technologies like 1.6T and CPO, collectively forming the core drivers. The industry is evolving along two parallel paths: first, Scale-out, which involves horizontal expansion through leaf-spine architectures, amplifying optical module demand with a "multiplier effect"; second, Scale-up, which breaks through the bandwidth and distance limitations of copper cables, accelerating the adoption of high-end optical modules in applications such as GPU rack interconnection and memory pooling.
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