Zhongtai Securities released a research report stating that the communications sector in 2026 may exhibit a scenario where "rising prices lead to lower valuations," driven by accelerated 1.6T shipments and the performance release of IDC, liquid cooling, and IoT modules. The firm remains optimistic about the "overweight" opportunities in the communications industry next year, fueled by AI computing infrastructure and satellite internet, while also highlighting domestic self-sufficiency and telecom operator dividend potential. Key focus areas include optical interconnect, ICT equipment, data center liquid cooling, copper connections, AIDC, AIoT, satellite communication & navigation, optical and submarine cables, and telecom operators.
**Key Insights:** 1. **Outperformance of Communications Index:** As of November 27, 2025, the communications sector (Shenwan) surged 64.67%, ranking second among 31 Shenwan sub-sectors, primarily driven by overseas AI giants’ commercialization, which boosted optical module stocks. The sector’s PE-TTM (excluding negatives) stands at 24.6x, ranking 16th overall and remaining undervalued within TMT.
2. **Theme 1: Overseas Cloud Giants’ Rising Capex, Focus on Google and Nvidia Chains** North American cloud leaders like Microsoft, Google, Meta, and Amazon continue increasing capital expenditures, with Nvidia projecting global AI investments to reach $3–4 trillion by 2030 (40% CAGR). Google’s model-compute-access-application closed-loop sets a benchmark, accelerating competition. By 2026, Google’s TPU and Nvidia’s GPU will compete, scaling high-speed networking. The 1.6T rollout and silicon photonics adoption are expected to accelerate, alongside emerging CPO/LPO technologies. Hollow-core fiber (low latency/loss) and liquid cooling (due to rising AI chip power demands) present key opportunities.
3. **Theme 2: Domestic Catch-Up and Self-Sufficiency Imperative** Alibaba, ByteDance, and Tencent initially planned capex hikes but slowed due to H20 chip export controls, shifting to domestic AI chips. Alibaba may exceed its ¥380B three-year investment plan, prioritizing local solutions over NVIDIA chips. Hyperscale nodes (adopted by Huawei, ZTE, Inspur) and self-developed chips by internet giants could drive edge IoT module growth in 2026.
4. **Theme 3: Satellite Internet’s Inflection Point** 2025 marked a milestone for China’s commercial space sector, with policy support (e.g., "Space Power" in the 15th Five-Year Plan), satellite licensing for telecom operators, and successful "Zhuque-3" launches. SpaceX’s cost-efficient reusable rockets and satellite production set a precedent. Domestic constellations like "StarNet" and "G60" may accelerate launches in 2026, supported by global demand (e.g., Belt and Road, Brazil). Opportunities span rocket/satellite manufacturing, terminals, and operations.
5. **Theme 4: Telecom Operators’ High Dividend Appeal** Operators’ stable operations, rising dividends, and declining capex underpin attractive yields. Rapid growth in IDC, cloud, and AI businesses may further enhance valuations amid favorable policies (e.g., dividend tax cuts).
**Risks:** AI underperformance, slow tech iteration, market competition, trade disputes, systemic risks, and data inaccuracies.
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