Shanghai Securities: Focus on AI computing power "core inflation" upstream materials + leading defensive dual main line.

Shanghai Securities issued a research report stating that computing power is still the most important thread, continuing to focus on the AI hard technology field. By 2025, the PCB performance is expected to be fully realized, and the order demand in 2026 is expected to continue to drive performance growth. PCB manufacturers' expectations will shift from "expectation-driven" to "performance realization" driven. The growth in optical interconnection demand, the presence of a capacity gap in optical chips, and the strong boom in optical fiber are expected. The new generation of AI server cabinets will fully adopt liquid cooling solutions, in line with the overall expectations of liquid cooling adoption. The Shanghai Securities recommends focusing on the upstream materials supply bottleneck in the industry chain where prices are rising and performance visibility is high, with the potential to realize performance quarter by quarter and the appropriate valuation of leading stocks. The main points of Shanghai Securities are as follows: Computing power is still the most important thread, continuing to focus on the AI hard technology field: PCB, optical module/CPO, liquid cooling & power supply 1. PCB: Order-driven performance growth, continuous increase in PCB value. By 2025, the PCB performance is expected to be fully realized, and the order demand in 2026 is expected to continue to drive performance growth, shifting PCB manufacturers' expectations from "expectation-driven" to "performance realization" driven. The appearance of new generation computing products such as the Rubin architecture, combined with multiple demands for orthogonal backplanes and LPU cabinets, is expected to boost the global AI computing hardware upgrade, with the PCB industry output expected to soar. 2. Optical communication: Setting the tone for "optical-copper integration," optimistic about the long-term industrial trends of CPO. In the short to medium term, multiple paths run in parallel, with copper cables continuing to play an important role in the short term, and CPO being the core trend in the medium to long term. The top five cloud service providers all plan to double their capital expenditure in 2026, with high growth in optical module sales expected to be sustainable. Optical interconnection demand is growing, there is a capacity gap in optical chips, and the optical fiber industry is entering a strong boom period. 3. Liquid cooling & power supply: Rubin enters mass production, driving the explosion in demand for liquid cooling and power supply. The new generation of AI server cabinets will adopt liquid cooling solutions comprehensively, in line with the overall adoption trend of liquid cooling; NVIDIA GPUs continue to iterate, chip power consumption continues to increase, driving the explosion in demand for liquid cooling and power supply. Focus on two main themes: "semiconductor inflation" in the upstream material segment + leading defensive dual themes First, focus on the rising price segments of upstream materials in the industry chain. 1) PCB upstream core raw materials, CCL price increases, market demand for high-performance electronic fabrics, HVLP copper foils, etc. exceed supply, difficult to match market demand capacity in the short term, driving industry price increases; suggest focusing on companies such as Grace Fabric Technology, Hubei Feilihua Quartz Glass, Anhui Tongguan Copper Foil Group, Long Young Electronic, and Sichuan Em Technology. 2) Upstream of optical communication, optical chips, optical fibers, high-end EML laser delivery times have been pushed back to after 2027, there is a capacity gap in optical chips, prices are expected to continue to rise; optical fiber prices are accelerating, the industry is entering a period of strong simultaneous growth in quantity and price; recommend focusing on companies such as Yuanjie Semiconductor Technology, Suzhou Everbright Photonics, Yangtze Optical Fibre And Cable Joint Stock, Yunnan Lincang Xinyuan Germanium Industry, etc. 3) The entire semiconductor industry chain is entering a period of price increases, facing supply chain risks against the backdrop of geopolitical tensions, prices in the upstream materials sector are steadily increasing, accelerating domestic substitution; recommend focusing on companies such as Red Avenue New Materials Group, Hubei Dinglong, Anji Microelectronics Technology, etc. Second is high performance visibility, expected to be realized quarter by quarter, and appropriate valuation of leading stocks. The recommended companies to watch are Victory Giant Technology, Wus Printed Circuit, Suzhou Dongshan Precision Manufacturing, Zhongji Innolight, Eoptolink Technology Inc., among others. Risk warning: Risks of a pullback in U.S. stocks; AI technology deployment and commercialization falling short of expectations; industrial policy changes; macroeconomic performance falling short of expectations.