Open Source Securities: Demand and prices for optical fiber cables steadily increasing, benefiting from the drive of AI data center construction.

Open Source Securities released a research report stating that, from the demand side, with the continuous iteration of AI large model training on the training side, the landing of AI applications on the inference side is accelerating, which may continue to drive global fiber optic cable demand. Beijing Vastdata Technology's flow demand within data centers, high-end single-mode and multimode fiber optics working together with ultra-high-speed optical modules may achieve efficient data transmission and flexible interconnection for short distances, promoting the evolution of intelligent computing centers towards higher density and lower power consumption. At the backbone network and metropolitan area network level, G.654.E optical fibers significantly improve transmission distance and system capacity, helping to build more efficient and economic ultra-long-distance high-bandwidth networks. In addition, because hollow-core optical fibers have advantages such as low latency, wide bandwidth, low loss, and low nonlinear effects, both domestically and internationally, efforts are actively being made to promote the development of new technologies such as hollow-core optical fibers, and in the long run, the demand for hollow-core optical fibers may gradually increase. From the supply side, the expansion cycle of optical rods is long, with high process requirements, and short-term supply may become tight. The traditional optical rod expansion cycle is relatively long, and the core-melting and stretching method for optical fiber preparation is suitable for long-distance optical fibers, primarily including prefabricated rod forming and fiber drawing. Among them, the mainstream prefabricated rod preparation methods include PCVD, OVD, and VAD. Fiber drawing is the process of high-temperature drawing of prefabricated rod through an optical fiber drawing tower. The drawing process is not complicated, but it requires coordination of rod speed, furnace temperature, drawing rate, etc., with high requirements for technical maturity and precise control yield for manufacturers, making expansion difficult. The bank believes that the continuously increasing demand for fiber optic cables poses high requirements on the capacity of manufacturers. In the short term, it may drive the global fiber optic cable manufacturers' utilization rates to a high level. However, due to the long expansion cycle of optical rods and new products occupying some capacity, the industry's supply may be relatively tight in the short term. According to the Asia-Pacific Fiber Optic Cable Industry Association and the Information Technology Institute's predictions, by 2025, global demand for fiber optic cables is expected to reach several hundred million core kilometers, and maintain a growing trend. The prices have been rising significantly since May, and Open Source Securities predicts that the construction of AI data centers may continue to drive steady increases in demand for fiber optic cables and prices. The bank points out that in the short term, there may be a supply shortage, highlighting investment opportunities in fiber optic cables. With the vigorous development of AI globally, the demand for fiber optic cables for interconnection between data centers internally and DCIs may continue to be driven. In the short term, global manufacturers have limited expansion capacity, which may lead to a supply shortage situation. The bank believes that the demand and prices for fiber optic cables are expected to continue to increase steadily. The bank recommends targets: Hengtong Optic-Electric (600487.SH), Jiangsu Zhongtian Technology (600522.SH); Beneficiaries: Yangtze Optical Fibre And Cable Joint Stock (06869,601869.SH), Jiangsu Etern (600105.SH), Fiberhome Telecommunication Technologies (600498.SH), and Shenzhen SDG Information (000070.SZ).