US Moves to Ban Chinese Optical Transceivers! Optical Communication Stocks Surge, AAOI Jumps Nearly 20%

The Trump administration is reportedly considering a ban on importing new Chinese data center hardware, with restrictions potentially extending to optical transceivers used in AI data centers. This news drove US optical communication stocks sharply higher on Tuesday (4th), as investors anticipate that US suppliers could capture orders previously fulfilled by Chinese manufacturers.

On Tuesday's market close, Applied Optoelectronics (AAOI-US) surged 19.44%, Coherent (COHR-US) jumped approximately 12.27%, Lumentum (LITE-US) rose 8.92%, and Corning (GLW-US) also climbed about 9%.

According to Reuters, citing four informed sources, the US Federal Communications Commission (FCC) is preparing to impose import restrictions on new Chinese-made optical transceivers. Optical transceivers are key components in AI data centers, primarily responsible for high-speed data transmission between servers and network equipment via fiber optics.

US officials are concerned that Chinese-made optical transceivers could pose risks to AI infrastructure, including data theft, malware injection, or service disruption, and aim to finalize regulations and begin enforcement within this year. However, the policy is still in the drafting stage, and the FCC may ultimately modify or even abandon the plan.

According to insiders, the FCC is considering banning all new models of Chinese optical transceivers from entering the US market, while possibly granting exemptions to certain non-Chinese suppliers. This approach mirrors previous FCC restrictions on Chinese drones, routers, robots, and solar inverters.

One of the primary companies affected by this policy is Zhongji Innolight (300308-CN), a major Chinese optical communications equipment manufacturer.

According to data from Counterpoint Research, Zhongji Innolight holds approximately 27% of the global data center optical transceiver market and was added in June to the US Department of Defense's list of companies allegedly linked to the Chinese military.

Data from the US Innovation Foundation indicates that about 90% of Zhongji Innolight's revenue comes from overseas markets. If the US formally bans the import of its new products, the company could face significant pressure in one of the world's largest AI data center markets.

For hyperscale cloud providers like Amazon AWS, the ban may force a supply chain shift, requiring procurement from non-Chinese suppliers such as Coherent, Lumentum, and others. However, due to uncertainties around pricing and supply capacity of alternative products, data center construction costs could rise.

On the other hand, US optical communication manufacturers are expected to be the main beneficiaries of this supply chain shift. The market anticipates that if Chinese competitors are excluded, companies like Coherent, Lumentum, and AAOI could not only secure more orders but also improve production utilization and pricing power.