Central China Securities 2026 Strategy for Communications Sector: Intelligent Innovation and Computing Power Interconnectivity Forge Ahead

Stock News11-25

Central China Securities released a research report stating that 2026 will witness a series of AI industry catalysts globally. Leading optical module manufacturers are expected to strengthen their dominance due to technological, customer, and scale advantages. Currently, the valuation of the communications sector index is below its decade-long average. Considering growth expectations and valuation levels, the firm maintains an "Outperform" rating for the sector.

Increased capital expenditures by top cloud providers will drive demand across the AI computing power supply chain. The dual engines of edge-side AI computing power and large-model capabilities will accelerate AI smartphone adoption. Telecom operators remain stable, with potential for higher dividend payouts.

**Key Highlights from Central China Securities:** - **Q1-Q2 2025:** DeepSeek's large-model breakthrough boosted market sentiment. Major telecom operators completed DeepSeek computing power network deployments, enhancing cloud services. Upbeat capital expenditure guidance from domestic cloud firms lifted sector valuations. - **Q2-Q4 2025:** Volatility arose from U.S. tariff policy concerns and doubts about optical module demand. By mid-April, tariff tensions eased, and AI computing power demand was confirmed, leading to a rebound in valuations. - **July 2025:** North American cloud providers raised capital expenditure guidance, further catalyzing the sector. - **September 2025:** Leading firms faced short-term growth slowdowns due to product iterations, client adjustments, and supply chain delays, sparking concerns about unclear AI business models.

**2026 Outlook:** - AI industry catalysts include NVIDIA’s Rubin GPU mass production, Google’s Gemini model launch, and clearer cloud provider spending plans. - AI smartphones with large-model integration may become personalized assistants, driving replacement cycles. - Telecom operators are advancing 6G R&D, with accelerating AI computing revenue growth.

**Investment Recommendations:** - **Optical Modules/Components/Chips:** Favor firms with technological leadership and scalable production (e.g., XYS, HGT, GXK, YJK, SJGZ, TCG). - **AI Smartphones:** Focus on companies benefiting from edge-side AI adoption (e.g., XWTX, ZXTX). - **Telecom Operators:** Stable dividend plays (e.g., CHT, CHA, CHU).

**Risks:** Trade disputes, supply chain instability, slower-than-expected AI or capex growth, and intensifying 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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