Chinese optical module stocks plunge 7% on US bill and data center delay fears
Chinese optical module stocks plunged on September 28, with the "Yi-Zhong-Tian" trio—Zhongji Innolight, Eoptolink, and TFC Communication—losing over 170 billion yuan in market value. The sell-off was triggered by a US bipartisan bill proposing to ban Chinese optical modules from federal sensitive systems, Oracle's force majeure notice to a data center developer over power delays, and Hengtong Optic-Electric's share issuance plan. Despite strong first-half earnings, market confidence was not restored.
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Cross-source coverage
Common ground
- Chinese optical module companies hold about 70% of the global high-end market and are key players in AI infrastructure.
- The US bill targeting Chinese optical modules includes a five-year transition period, showing American alternatives aren't ready at scale.
- The 170 billion yuan market cap loss reflects real concerns, not just panic.
- Chinese firms have strong domestic demand and government backing for AI buildout.
- Co-development relationships with hyperscalers give Chinese suppliers some pricing power.
Points of contention
- Eastern Agent says the sell-off is an emotional overreaction to political noise, while Neutral Agent says it's a rational repricing of risks like energy and demand slowdown.
- Regional Agent argues the US is using legislation to slow China's rise because it can't compete, while Neutral Agent says both sides are playing power games.
- Eastern Agent believes Chinese domestic AI demand will quickly replace any Western losses, but Neutral Agent says domestic growth can't fully offset a global slowdown.
- Regional Agent thinks Chinese firms will thrive by selling to the Global South, but Neutral Agent says those markets are too small to matter at scale.
- Neutral Agent warns of margin compression like in the solar industry, while Eastern and Regional Agents say optical modules are custom products with high switching costs that protect margins.
Blind spots
- No one fully addressed how a simultaneous slowdown in both Western and Chinese hyperscaler spending could create a temporary demand gap.
- The debate ignored the risk of overinvestment by Chinese firms like Eoptolink if growth slows, leading to wasted capacity.
- Little discussion of how higher interest rates and capital costs might affect AI infrastructure financing globally.
- The impact of China's own export controls or industrial policy restrictions on technology flows was barely mentioned.
WorldAttention’s read
The sell-off in Chinese optical module stocks is driven by a mix of political noise, energy constraints, and fears of a global AI buildout slowdown. Chinese firms have strong fundamentals—70% market share, co-development deals, and government-backed domestic demand—but the easy growth phase is over. The real risk isn't a ban or a power outage, but a 12-18 month period where both Western and Chinese hyperscalers slow procurement at the same time, squeezing margins. The market overreacted in some ways, but it's correctly pricing in that the AI infrastructure buildout is getting messier and more expensive. Companies with deep R&D budgets and sticky customer relationships will survive, but the days of frictionless growth are gone.
Reporting timeline
Optical Communication Stocks Plunge on US Bill, Share Issuance, and Data Center Delay Fears
Optical communication concept stocks suffered a heavy selloff in Hong Kong trading. Yangtze Optical Fibre and Cable fell 17%, while Zhongji Innolight dropped nearly 12%. The decline was triggered by multiple bearish factors: a US cross-party bill proposing to ban Chinese optical modules from federal sensitive systems, naming Zhongji Innolight and Eoptolink as restricted suppliers; Hengtong Optic-Electric's plan to issue up to 6.636 billion yuan in shares for optical communication projects; and Oracle's force majeure notice to a data center developer, raising doubts about the pace of future optical module procurement. Citigroup noted that Zhongji Innolight and Eoptolink have limited exposure to US defense or intelligence supply chains, and the bill's five-year transition period and exemption clauses provide near-term buffers, but political risks require monitoring. Jefferies stated that a US ban on Chinese optical modules in private data centers is very unlikely, calling the bill mostly policy noise.
China's 'Yi Zhong Tian' optical module stocks lose over 170 billion yuan in market value
On September 28, shares of several optical module concept stocks fell sharply in intraday trading. Zhongji Innolight (300308.SZ) dropped 9.06%, Eoptolink Technology (300502.SZ) fell 8.01%, and TFC Communication (300394.SZ) declined 9.12%. Collectively known as 'Yi Zhong Tian' in A-shares, the three stocks lost over 170 billion yuan in market value. The decline followed news that Oracle had issued a force majeure notice to a large data center developer over potential power supply delays, raising investor concerns about data center construction delays. Morgan Stanley analysts warned that some data centers face significant construction or completion risks, and that companies planning to finance AI infrastructure through debt markets also face challenges. Despite strong first-half earnings—total revenue of 65.52 billion yuan and net profit of 22.38 billion yuan for the three firms—share buybacks by Zhongji Innolight and a stock incentive plan by Eoptolink have failed to boost market confidence. From their June highs to September 24, Zhongji Innolight shares had fallen 34.51%, Eoptolink 41.77%, and TFC Communication 17.63%.
Read sourceOptical module stocks fall; 'Yi-Zhong-Tian' trio loses over 170 billion yuan in market cap
On September 28, several optical module concept stocks declined in intraday trading. Zhongji Innolight (300308.SZ) fell 9.06%, Eoptolink Technology (300502.SZ) dropped 8.01%, and TFC Communication (300394.SZ) slid 9.12%. The three A-share stocks, collectively nicknamed 'Yi-Zhong-Tian', lost over 170 billion yuan in combined market capitalization. The decline came despite Zhongji Innolight's recent completion of a 50 billion yuan share buyback, announced on September 24, which the company said demonstrated confidence in its long-term development. Market sentiment was affected by reports that Oracle had issued a force majeure notice to a large data center developer due to potential delays in securing power supply. Morgan Stanley analysts warned that some data centers face significant construction or completion risks, and that companies planning to finance AI infrastructure through debt markets also face challenges. Despite the stock declines, the three companies reported strong first-half earnings, with combined revenue of 655.2 billion yuan and net profit of 223.8 billion yuan.
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Optical module stocks plunge, 'Yi-Zhong-Tian' trio loses over 170 billion yuan in market value
On September 28, multiple optical module concept stocks fell sharply during trading. Zhongji Innolight (300308.SZ) dropped 9.06%, Eoptolink Technology (300502.SZ) fell 8.01%, and TFC Communication (300394.SZ) declined 9.12%, collectively wiping out over 170 billion yuan in market value for the trio known as 'Yi-Zhong-Tian' in A-shares. The decline came despite Zhongji Innolight's recent announcement of a 49.97 billion yuan share buyback completed on September 24, which the company said reflected confidence in long-term development. Market sentiment was dampened by reports that Oracle had issued a 'force majeure' notice to a large data center developer over potential power supply delays. Morgan Stanley analysts warned that some data centers face significant construction or completion risks, and that companies planning to finance AI infrastructure through debt markets also face challenges. The three companies reported strong first-half earnings, with combined revenue of 655.2 billion yuan and net profit of 223.8 billion yuan. Eoptolink had previously set ambitious revenue targets in a stock incentive plan, aiming for 900 billion yuan by 2027.
Read sourceChina Stocks Plunge After Holiday, Tech Indices Down Over 4% on Optical Communication Sell-Off
On the first trading day after the Mid-Autumn Festival, Chinese A-shares experienced a sharp decline, with the Shanghai Composite Index falling nearly 2%, the Shenzhen Component Index dropping over 3%, and the ChiNext and STAR 50 indices both plunging more than 4%. The sell-off was led by the optical communication sector, which crashed 7% with about 20 stocks hitting the daily limit down. The trigger was a bill proposed by several U.S. senators that would ban the federal government from purchasing optical module products from Chinese companies like Zhongji Innolight (Innolight) and Eoptolink for national security systems. This came shortly after the U.S. FCC recorded that Zhongji Innolight had received FCC certification for three of its product series on September 21. Market analysts commented that while the market has fallen back below the trend line, the downside is limited, and attention should be paid to the 90-minute close, which may show bottom divergence, suggesting the overall market outlook is not pessimistic.
Read sourceOptical Module Stocks Plunge 7% on US Bill Fears; Analysts Raise 1.6T Shipment Forecasts
On the first trading day after a holiday, China's A-share market fell sharply, with the optical communication sector leading the decline, dropping 7%. Major stocks including Zhongji Innolight, Eoptolink, and Tianfu Communication fell over 7%. The sell-off was triggered by a news report that a retiring US lawmaker proposed banning government projects from using Chinese-made optical transceivers for national security reasons. Despite this, the article notes that AI-driven demand for high-speed optical modules continues to grow, with the focus shifting from 800G to 1.6T products. A foreign institution raised its global optical module shipment forecasts for 2026-2028 by 21% to 31%, with 1.6T and above product forecasts raised by 29% to 61%. The global optical module market is projected to reach about $67.7 billion in 2026 and $148.5 billion in 2028. HuiLv Ecology announced a 309 million yuan investment to build a production line for 2 million high-speed optical modules annually. The article presents both bearish political risk and bullish industry fundamentals.
Read sourceChinese optical module stocks plunge 7% on US ban fears, but global banks raise 1.6T shipment forecasts
On the first trading day after the National Day holiday, Chinese A-share markets fell sharply, with the optical communication sector plunging 7%. Major stocks including Zhongji Innolight, Eoptolink, and Tianfu Communication dropped over 7%. The sell-off was triggered by a 'small negative rumor' that a retiring US lawmaker proposed banning government procurement of Chinese-made optical transceivers for national security reasons, despite Zhongji Innolight having received FCC certification for three products on September 21. However, the article notes strong underlying demand driven by AI computing infrastructure, with 800G modules maintaining stable orders from North American cloud vendors and the focus shifting to 1.6T modules. An unnamed foreign institution raised global optical module shipment forecasts for 2026-2028 by 21%, 31%, and 31% respectively, with 1.6T and above products seeing a 29% to 61% upward revision. The global optical module market is projected to reach approximately $67.7 billion in 2026 and $148.5 billion by 2028. Domestic leading optical module companies reported over 180% year-on-year revenue growth in the first half of the year, with 1.6T products becoming the main driver.
Zhongji Innolight Drops 5% on US Bill to Ban Chinese Optical Modules
Shares of Zhongji Innolight (03308) fell over 5% in Hong Kong trading, closing down 4.7% at HK$1,116 on a volume of HK$196 million. The decline followed a weekend report that U.S. bipartisan senators introduced a bill on September 25 to restrict the use of Chinese-made optical transceivers in sensitive federal government systems. The proposed legislation specifically names Zhongji Innolight and Eoptolink as suppliers. Analysts note the bill is still in the proposal stage and includes a five-year transition period before any ban takes effect. They also highlight that Chinese manufacturers hold 70% of the global high-end optical module market, suggesting the short-term impact is limited. The news has circulated widely among investors, triggering the sell-off.
Read sourceOptical Module Stocks Fall; 'Yi-Zhong-Tian' Trio Lose Over 170 Billion Yuan in Value
On September 28, multiple optical module concept stocks declined during trading. Zhongji Innolight (300308.SZ) fell 9.06%, while Eoptolink Technology and Tianfu Communication also weakened, with Zhongji Innolight (03308.HK) dropping over 8%. On September 24, the last trading day before the Mid-Autumn Festival, Zhongji Innolight announced the results of its share buyback, having repurchased 5.653 million shares (0.48% of total shares) for 4.997 billion yuan. The trio's stock prices peaked in June 2024; from those highs to September 24, Zhongji Innolight fell 34.51%, Eoptolink dropped 41.77%, and Tianfu Communication declined 17.63%. Downstream data center demand faces headwinds after Oracle's data center developer issued a force majeure notice citing potential power supply delays, raising investor concerns about data center construction delays. Despite the stock declines, the three companies reported strong first-half earnings, with combined revenue of 65.52 billion yuan and net profit of 22.38 billion yuan. Zhongji Innolight's revenue surged 182.49% to 41.778 billion yuan, with net profit up 241.7% to 13.651 billion yuan. Eoptolink's revenue rose 100.34% to 20.91 billion yuan, with net profit up 90.98% to 7.529 billion yuan. Eoptolink also set ambitious revenue targets in a stock incentive plan: 90 billion yuan by 2027, 240 billion yuan cumulative by 2028, and 450 billion yuan cumulative by 2029.
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