Open Securities: AI-driven Optical Copper Advances AEC and Benefits from High-speed Short-distance Connection Needs.

The report released by Kaiyuan Securities states that as generative artificial intelligence technology matures, the demand for computing power in data centers continues to rise. Copper connectivity solutions, with their advantages of low cost and low power consumption, are expected to expand their market share in short-distance connections. It is recommended to pay attention to leading enterprises in the copper cable connector industry chain at all levels: (1) leading companies in the connector field; (2) with obvious integrated advantages, cost and research advantages in the copper connection field; (3) rooted in the fields of DAC/AOC/ACC/AEC, and having deep cooperation with leading AI server companies; (4) benefiting target companies in the wire sector. Key points of Kaiyuan Securities are as follows: In the AI wave, copper interconnects are expected to increase their market share in short-distance connections due to their advantages of low cost and low power consumption. As generative artificial intelligence (AIGC) technology gradually matures, emerging applications based on the "big data + large computational load" model are constantly emerging, significantly driving the continuous increase in computing power demand. As the core carrier of computing power, data centers are expected to rapidly expand in the coming years in the related server fields and upstream and downstream industries under the drive of high computing power demand. Copper connectivity solutions are expected to increase their market share in short-distance connections within data centers due to their advantages of low cost and low power consumption. The widespread application of copper connectivity solutions in GB200 drives high demand for high-speed copper cables driven by AI. As data transfer rates and bandwidth between data center devices continue to increase, choosing the right interconnect solution has become a market focus. Fiber optics and copper cables have become the main transmission media due to their anti-interference and security features. Although fiber optics are widely used in the communication industry due to their advantage of long-distance transmission, copper connectivity solutions have gradually gained a larger market share in short-distance connections within data center devices (such as switches to servers). An important change in the NVIDIA GB 200 solution is the interconnection of switches and computing nodes within a single cabinet, with copper cable connections used for internal connections of switches instead of the previous PCB-optical module-cable connection. AEC, as a high-speed short-distance connectivity technology within data centers, is gradually becoming a focus of industry attention. The core of AEC lies in enhancing the transmission distance and signal quality of copper cables through built-in signal enhancement chips, making it play an important role in high-speed interconnections within data centers. Currently, AEC in China is in a rapid development stage, with many companies seeking to gain a competitive advantage in the future data center market by deploying AEC. Looking ahead, with the continuous development of AI technology and the increasing demand for computing power in data centers, AEC is expected to make greater breakthroughs in the field of high-speed short-distance connectivity within data centers, injecting vitality into the development of China's computing power industry chain. Risk warning: technology gap risk, international standard setting risk, market competition risk, raw material price fluctuation risk, downstream demand fluctuation risk.