The current market trend suggests that if you are not seeking opportunities within the "optical" sector, you risk being left behind. By mid-April, market indices have reached new highs, with leading optical communication stocks hitting record levels almost daily. The number of "ten-bagger" stocks has become too many to count. Opportunities that were available last year but missed have returned. On one hand, the fundamental logic driven by industry acceleration remains strong; on the other, earnings continue to exceed expectations, replicating a scenario similar to last year.
While some stocks are still struggling, leaders like Source Photonics, Everbright Photonics, Yangtze Optical Fibre, Changxin Broadband, Shijia Photonics, and Deming Li have already turned the page on the "ten-bagger" narrative, pushing stock prices even higher.
During the first-quarter earnings season, a new theme for positioning throughout 2026 is emerging, suggesting that the investment opportunity in optical communications may have already begun.
Leading stocks such as Source Photonics and Everbright Photonics are driving the optical communication rally to new heights. Looking back to 2024, two years ago, market indices and most stocks were oscillating at low levels. A significant rally on September 24, 2024, fundamentally shifted market direction, marking the starting point for many doubling or even ten-bagger stocks.
Investing is like planting a tree—the best time was ten years ago, the second best is now. This implies that time is a crucial variable in investing. A long-term perspective helps smooth out short-term volatility, allowing the power of value reversion to fully manifest. It is clear that the list of ten-bagger stocks is concentrated in sectors like AI computing power and optical communications, including Yangtze Optical Fibre, Source Photonics, Changxin Broadband, Shijia Photonics, and Everbright Photonics.
Two companies stand out: Source Photonics, representing peak stock price performance, and Everbright Photonics, exemplifying high valuation levels. As of April 16, only three A-share stocks trade above 1,000 yuan, with Source Photonics ranking second at 1,313.00 yuan. Back on September 24, 2024, its stock price hovered below 100 yuan. Few could have predicted that a company specializing in optical chips would surge 14-fold.
Founded in 2013 and listed on the STAR Market in December 2022, Source Photonics remained relatively subdued for the first two and a half years after its IPO. However, by the spring of 2025, the company began to gain momentum. It primarily produces optical chips for telecommunications and data center markets. While telecommunications is a mature sector, AI computing power has created highly elastic opportunities in data centers. As market focus shifted from telecommunications to data centers, the company's valuation expectations expanded significantly. Driven by catalysts like AI computing power, optical communications, and optical modules, coupled with consistently outperforming quarterly earnings, the company reported a net profit of 190 million yuan in 2025, turning a loss into a gain with a year-over-year increase of 3,212.6%.
Regarding Everbright Photonics, some investors remark that "the market has priced it at Mount Everest levels." The company's latest TTM valuation stands at 2,690 times, ranking 18th among over 5,000 listed companies. Since the market rally began on September 24, 2024, its stock price has surged more than 11-fold. Founded in Suzhou in 2012, the company now boasts a comprehensive product matrix in data communication chips.
Both Source Photonics and Everbright Photonics are involved in optical communications, specifically optical chips. Optical chips play a core performance role in optical communications. Recently, rumors surfaced that a leading optical module manufacturer cut capacity due to optical chip shortages. Although clarified, this highlights the high value-added nature of optical chips in the supply chain.
Successful investing requires patience and discipline. The sustained bull runs of stocks like Source Photonics and Everbright Photonics demonstrate the importance of selecting the right sector and adhering to a long-term holding strategy rather than short-term trading tactics.
The beta opportunity in optical chips continues to manifest amid widening supply-demand gaps. Looking overseas, Lumentum, a leading optical chip manufacturer listed in the U.S., has shown strong stock performance, with its rally starting around early April last year. Since April 4 last year, its stock has surged over 14-fold.
The recent升温 in A-share optical chip stocks is partly related to Lumentum, which recently indicated that its 2028 capacity could be booked within two quarters. This signals that the supply-demand gap for optical chips may not narrow in the short term. This gap is a key driver and underlying logic for optical modules and chips.
Optical modules and chips are at the forefront of market trends and capital focus. Optical modules, resembling small USB drives, perform photoelectric magic, assembled with precision akin to embroidery on a grain of rice. Optical chips, as photoelectronic components, are produced in cleanrooms surpassing surgical standards, with high-precision lithography that inspires awe. As the core components of optical communication systems, optical chips enable the fundamental function of photoelectric signal conversion, directly determining transmission efficiency, speed, and reliability. Optical modules serve as end devices in these systems, facilitating bidirectional conversion between electrical and optical signals while performing modulation, demodulation, and transmission functions. They are the application carriers for optical chips.
Within the industry chain, optical chips represent a segment with high technological barriers and costs. Key metrics of optical modules, such as transmission rate, power consumption, and cost, depend directly on the technological level of optical chips.
Optical chips convert electrical signals to optical signals via laser chips (transmitter end) and revert optical signals back to electrical signals through detector chips (receiver end), enabling basic optical communication functions. As data centers and 5G/6G networks demand surging bandwidth, rate upgrades in optical chips are becoming critical.
Localization and high-end trends provide Chinese companies with opportunities to overtake incumbents. Although the localization rate for high-speed optical chips remains relatively low, with the high-end market dominated by overseas players like Lumentum, many Chinese companies are catching up. For instance, Accelink has begun small-scale commercial use of its self-developed high-end optical chips, while HGTEC has largely achieved self-sufficiency in high-end optical chips.
Additionally, several companies are bolstering their optical chip capabilities through acquisitions or capital increases. For example, by acquiring Guangwei Technology, X-Chuang Data has entered the optical chip and module sectors. Its stock price has repeatedly hit new highs, surging over 50% after announcing on April 14 that first-quarter earnings are expected to grow 284.14% to 402.33%.
In conclusion, greed (chasing highs), fear (selling lows), and herd mentality (following trends) are major enemies of successful investing. Overcoming these instincts is essential for investors. The opportunity in optical communications is currently deepening and broadening within a new cycle of industry and earnings growth, with no signs of abating in the short term. Whether to "wait for the light" or "chase the light" is a decision each investor must make.
(Mentioned stocks are for illustrative purposes only and not intended as investment advice.)
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