China Galaxy Securities: Computing power network construction boosts optical fiber demand; tight supply and demand foster high prosperity.

China Galaxy Securities released a research report stating that the State Council executive meeting studied the construction of computing power networks and proposed strengthening the monitoring and scheduling of computing power resources and the construction of backbone optical fiber networks. The construction of computing power networks resonates with AI demand, comprehensively boosting optical fiber demand. Whether it is the expansion of the backbone layer of computing power networks or the upgrading of optical interconnect architectures within data centers, both are opening up considerable incremental space for the optical fiber industry. The current optical fiber market is in a stage of structural shortage where demand growth far exceeds supply release. The bank believes that this supply-demand gap may continue to widen, and the optical fiber sector is gradually switching from a traditional cyclical telecommunications track to a computing power infrastructure track with high-growth attributes. The main points of China Galaxy Securities are as follows: The meeting pointed out that computing power networks are the foundational support for AI development It is necessary to adhere to rational layout and standardized order, further improve computing power infrastructure, actively promote the R&D and application of key technologies and equipment, and build a multi-tier networked computing power system. It is necessary to promote computing-power-electricity coordination and computing-network integration, strengthen the monitoring and scheduling of computing power resources and the construction of backbone optical fiber networks, reinforce the planning linkage of computing power and electricity facilities, and accelerate the implementation of projects such as green electricity direct connection and source-grid-load-storage. It is necessary to better leverage the role of market mechanisms, support enterprises in carrying out technological innovation, resource integration, and application promotion, and promote better matching of supply and demand. The construction of computing power networks resonates with AI demand, comprehensively boosting optical fiber demand Currently, the construction of global computing power networks is entering an accelerated phase. The explosive growth in demand for large model training and inference is reshaping the demand structure of the entire optical communications industry chain. As the physical carrier of information transmission in computing power networks, the importance of optical fiber has been amplified to an unprecedented degree in this process. Within clusters, GPUs need to frequently perform massive parameter synchronization and gradient exchange. The rapid growth of east-west traffic places higher demands on network bandwidth and latency. After rates exceed 112Gbps, the transmission distance of traditional copper cables continues to decline, and optical interconnect is accelerating its penetration into shorter distances. As per-channel rates evolve from 400G to 800G, 1.6T, and even 3.2T, the iteration speed of optical modules has accelerated significantly, directly driving demand for upstream optical fiber and passive components such as FAUs. In addition, the large-scale deployment of AI training clusters has caused exponential growth in interconnect bandwidth demand within data centers, further intensifying the demand for high-density, low-loss optical fiber. Therefore, whether it is the expansion of the backbone layer of computing power networks or the upgrading of optical interconnect architectures within data centers, both are opening up considerable incremental space for the optical fiber industry. The supply-demand pattern remains tight, and the optical fiber industry is entering a high-prosperity cycle In terms of supply and demand, the current optical fiber market is in a stage of structural shortage where demand growth far exceeds supply release. On the demand side, AI capital expenditure represented by the four major North American cloud vendors continues to be raised, and combined with the acceleration of domestic computing power infrastructure, the share of optical fiber demand in global data center and DCI scenarios is rising rapidly. However, the supply side is constrained by the rigid bottleneck of core upstream optical fiber preforms. As the core component of optical fiber costs, optical preforms have long cycles for production line construction, process validation, and yield ramp-up. Earlier low-price competition in the industry led most manufacturers to be cautious about capacity expansion. At present, the optical preform capacity utilization rate of leading global manufacturers is already at full load. Because the drawing speed of high-end optical fiber (such as G.657.A2 bend-resistant fiber, polarization-maintaining fiber, etc.) is lower than that of ordinary optical fiber, the structural crowding out of capacity further intensifies the supply bottleneck. We believe that this supply-demand gap may continue to widen. Among leading enterprises with high preform self-sufficiency rates, the profit elasticity brought by price increases will be fully released, and the optical fiber sector is gradually switching from a traditional cyclical telecommunications track to a computing power infrastructure track with high-growth attributes. Risk warnings Risks such as AI development falling short of expectations, application implementation falling short of expectations, and the impact of geopolitics on the industry.