China Securities Co., Ltd.: Continued high prosperity in the global optical communication industry, five years of growth expected.

China Securities Co., Ltd. released a research report stating that the AI computing power industry chain has entered a period of deep outbreak of downstream demand driving upstream capacity. Amazon.com, Inc. (AMZN.US) reported AI annual revenue exceeding $15 billion in the first quarter, demonstrating that cloud giants have established strong commercial realization capabilities and certainty in AI applications. Meanwhile, upstream core optical component giant Lumentum (LITE.US) may soon sell out of capacity until 2028, revealing the scarcity and lengthy construction cycle of underlying hardware support. This order lock-in from cloud software revenue growth to hardware infrastructure spanning several years constitutes the most solid economic cycle loop in the current AI industry. The company maintains a bullish view on the global optical communication industry, expecting sustained high growth over the next five years and continuously recommends the optical communication sector. Key points from China Securities Co., Ltd.: Lumentum's guidance is positive, continuously recommending the optical communication sector. Lumentum CEO stated that the company expects to lock in full-year 2028 capacity within the next six months. Amazon.com, Inc. CEO Andy Jassy disclosed in the annual shareholder letter that the commercial return on the company's AI layout is accelerating. The AI computing power industry chain remains highly prosperous. Lumentum CEO Michael Hurlston explicitly stated in Tokyo that the company expects to lock in full-year 2028 capacity within the next six months, with major growth driven by aggressive demand from U.S. hyperscale data centers for 1.6T optical modules and laser chips. Lumentum previously confirmed that its full-year 2027 capacity had already been secured by CSPs such as Microsoft Corporation and Alphabet Inc. Class C. Lumentum's CEO bluntly stated that North American CSP capital expenditures are huge. Amazon.com, Inc. CEO Andy Jassy disclosed in the annual shareholder letter that the commercial return on the company's AI layout is accelerating: chip business annual revenue exceeds $20 billion, AWS cloud business AI revenue annual run rate surpasses $15 billion, both of which are officially disclosed for the first time by the company. Jassy stated that AWS AI revenue is still "rapidly ascending," and if not for the computing capacity bottleneck faced by the entire technology industry, cloud business growth could have been even faster. The fiber optic Optical Cable Corporation sector experienced some adjustments on Friday, with market concerns about delays and price pressures from carrier group purchases, as well as concerns about G657A2 fiber optic prices. The company believes that based on export data for fiber optics in China in February, around 80% or even higher of domestic fiber optic monthly production may have already been exported, resulting in a significantly reduced proportion of purchases by carriers as fiber optics are in short supply. Following the cancellation of China Telecom Corporation Group's fiber optic group procurement, several provincial companies had to initiate emergency purchases due to urgent demand. Guangdong Telecom and Guangxi Telecom began announcing the winning bidders on April 8th and 9th, respectively, with the unit price for G.652D-24 core Optical Cable Corporation falling between 102.1 yuan and 103.5 yuan per core kilometer, with fiber optic prices expected to be around 70 yuan per core kilometer. The winning bid price increased by over 250% compared to China Mobile Limited's fiber optic winning bid price last year and fell 16% below the price of 83.40 yuan per core kilometer in the Chinese market disclosed by CRU at the end of March, falling within a reasonable range. In addition, based on industry feedback, current 657A2 fiber optic factory prices are stable, with channel prices possibly temporarily affected by the Russia-Ukraine ceasefire. The company believes that short-term price fluctuations in the market are normal, similar to storage, and with quarterly reports about to be disclosed, coupled with sizable recent increases in the sector, some adjustments may occur, but the fiber optic industry's prosperity remains intact, with adjustments potentially presenting opportunities, and the company continues to remain positive. The AI computing power industry chain has entered a period of deep outbreak of downstream demand driving upstream capacity. Amazon.com, Inc. surpassed $15 billion in AI annual revenue in the first quarter, proving that cloud giants have established strong commercial realization capabilities and certainty in AI applications. Meanwhile, the upstream core optical component giant Lumentum may soon sell out of capacity until 2028, revealing the scarcity and long construction cycle of underlying hardware support. This order lock-in from cloud software revenue growth to hardware infrastructure spanning several years constitutes the most solid economic cycle loop in the current AI industry. The company maintains a bullish view on the global optical communication industry, expecting sustained high growth over the next five years, and continuously recommends the optical communication sector. Risk warnings: Impact of international environmental changes on the supply chain; tariffs affect beyond expectations; AI industry development falls short of expectations; market competition intensifies, leading to rapid decline in profit margins; exchange rate fluctuations affect the foreign exchange gains and profit margins of export-oriented enterprises; digital economy and digital China construction fall short of expectations; cloud computing business development by telecommunication operators misses expectations; capital expenditure by operators misses expectations; capital expenditure by cloud manufacturers fails to meet expectations; demand in the communication module and intelligent controller industry falls short of expectations.