Three Offensive Formations with Balanced Attack and Defense: 00877 Deeply Tied to Global Tech Giants, Precisely Capturing AI Infrastructure Bonanza

To build an autonomous high-speed network architecture, NVIDIA is reportedly evaluating the acquisition of long-haul dark fiber resources in the United States. If confirmed, this move will further accelerate demand for optical transceiver modules, passive optical components, and high-density optical connectivity equipment, driving the commercialization of silicon photonics and CPO technology. In this wave of transformative changes in transmission architecture, companies that master key optical transmission technologies and possess infrastructure supply moats will be the first to seize massive market opportunities. China's optical communication industry is rising globally amid the AI computing arms race and rapid expansion of large-scale data centers. Leveraging unparalleled production capacity, cost advantages, and deep partnerships with cloud service providers (CSPs), Chinese firms now dominate the global high-speed optical module market. Stocks such as Zhongji旭創, XinYiSheng, and TianFu Communication have not only become thousand-yuan RMB stocks but have also surpassed Kweichow Moutai to become the top performers in mainland equities, reshaping the capital market structure. Among Taiwan-listed China ETFs, 00877 Fu Hua China 5G has the highest weighting in optical communication stocks and has significantly outperformed traditional, old-economy-focused China ETFs in short-, medium-, and long-term performance.

"Light replacing copper" has become an inevitable trend. In traditional server architectures, transmission between chips and modules relies heavily on copper cables. However, as AI clusters expand to tens of thousands of GPUs/TPUs, traditional copper cables face fatal bottlenecks—high latency, high power consumption, and high heat dissipation—leading to transmission speeds failing to keep up with computing demands and causing severe data congestion. Just as the human body requires blood vessels to deliver nutrients, optical communication technology can increase transmission speeds tenfold, achieving ultra-low latency, while reducing power consumption by 50% and heat output by 70%. The evolution from silicon photonics to co-packaged optics (CPO) technology drastically shortens the electro-optical conversion distance, fundamentally resolving energy and bandwidth limitations. "Light replacing copper" has become an irreversible trend, with modern AI data centers highly dependent on optical communication to handle massive data flows. The fiber density required for AI server racks is now over ten times higher than that of traditional racks.

00877 Dominates Domestic China ETF Performance. China's optical communication supply chain holds a strong competitive edge in global midstream and downstream manufacturing and cost control. While investors can access mainland optical communication opportunities through channels like Shanghai-Hong Kong and Shenzhen-Hong Kong Connect, these are currently limited to professional investors, making it extremely difficult for general domestic investors. China ETFs are virtually the only way for local investors to participate. However, fund expert Feng Zhiyuan warns that Taiwan-listed China ETFs fall into two categories—"old economy" and "new economy"—with vastly different performance outcomes. Traditional China ETFs (e.g., 0061, 006206, 00636), closely tied to China's macroeconomic conditions and domestic consumption, have underperformed in recent years as the economy slows, real estate, banking, insurance, and consumer sectors remain weak.

In contrast, 00877 Fu Hua China 5G, focused on new economy investment opportunities, tracks the "CSI 5G Communication Thematic Index," primarily investing in A-shares related to 5G communication, optical communication, AI infrastructure, and their supply chains. Its core holdings avoid the macroeconomic headwinds of traditional A-shares, instead precisely targeting the core AI computing hardware supply chain and optical communication stocks, benefiting from the global surge in AI capital expenditure. 00877 adopts a no-dividend policy, reinvesting all profits. According to Lipper data, 00877 surged nearly 100% in 2023, claiming the title of top-performing overseas ETF. In the first half of 2024, it continued its momentum, rising over 90%, far outpacing all other Taiwan-listed China ETFs. The fund's net asset value soared from a low of 9.8 yuan to a high of 50.8 yuan (a 418% increase).

Three Offensive Formations Ensure Balanced Attack and Defense. Fund expert Feng Zhiyuan further analyzes that as of July 22 this year, the top ten core holdings of 00877 account for nearly 62% of total weight. These top ten stocks have delivered an average gain of 78.3% year-to-date and an average one-year gain exceeding 311.8%, capturing extraordinary alpha excess returns. These holdings can be categorized into three core offensive formations that work in tandem:

First Formation: Optical Communication (CPO/Optical Modules)—27% Weight, Performance Core Driver. Microsoft, Google, Meta, and NVIDIA all plan to significantly expand their AI data centers, creating strong, rigid demand for 800G/1.6T high-speed optical modules. 00877 precisely targets the optical communication sector with a 27% weighting. Key holdings include the "Yizhongtian" trio—XinYiSheng, Zhongji旭創, and TianFu Communication—all within the top five holdings. These stocks have averaged nearly a fivefold increase over the past year, directly contributing to core performance. Additionally, 00877 heavily invests in Yuanjie Technology, the leader in high-speed optical chips. Riding the wave of domestic high-speed chip development, Yuanjie Technology has surged nearly tenfold in the past year, further boosting 00877's performance.

Second Formation: High-Frequency, High-Speed PCB and Materials—14.5% Weight, Transmission Upgrade Secondary Engine. Next-generation AI servers (e.g., NVIDIA Blackwell architecture) are driving a sharp rise in demand for 20+ layer high-multilayer PCBs and low-loss copper-clad laminates (CCL). 00877's holdings in Dongshan Precision (+144.1% YTD), Shengyi Technology (+70.2% YTD), and Huatek have become the strongest secondary growth engine outside the optical communication group.

Third Formation: Servers and Connectors—Over 7% Weight, Structural Foundation for Balanced Offense and Defense. Beyond the sharp "offensive spear" of optical communication and PCB sectors, 00877 also includes a solid "defensive shield" composed of Industrial Fortune (global AI server ODM leader) and Luxshare Precision (vertical integrator of NVLink high-speed copper cables and connectors). This allows the fund to enjoy the explosive growth of mid-sized tech stocks while benefiting from the liquidity protection and downside support provided by large-cap giants, achieving a balanced offensive and defensive posture.

China's "Yizhongtian" Dominates the Global Optical Communication Market. 00877's portfolio includes three leading optical communication companies collectively known as "Yizhongtian," each holding a dominant global market share. Zhongji旭創 (Zhong) is the world's largest high-speed optical communication module leader, deeply tied to NVIDIA, and the first to achieve mass production and delivery of 800G and 1.6T products. Last year, NVIDIA significantly increased its 800G optical module order volume for 2026 by 35%, with Zhongji旭創 and XinYiSheng together capturing nearly 60% of these orders. Zhongji旭創 also co-defines and co-develops products with NVIDIA, Google, and Meta, achieving deep technological integration. Its 1.6T product has reportedly passed NVIDIA's certification and secured supply chain orders from Google's TPU v7. The market estimates the global optical module market will reach $22.8 billion this year, with 800G and 1.6T products leading the market. Zhongji旭創 is the only company globally capable of mass-producing and delivering both 800G and 1.6T modules.

Zhongji旭創, leveraging its world-leading market share in optical modules, saw its stock price surge from a low of over 100 yuan at the beginning of last year to a record high of 1,416 yuan RMB on June 21 this year—a more than tenfold increase. Its current market capitalization exceeds one trillion yuan RMB. Goldman Sachs has significantly raised its target price for Zhongji旭創 to 2,581 yuan RMB. The company has recently initiated a dual A+H listing on the Hong Kong Stock Exchange, with international institutional investors like Temasek and BlackRock preparing capital for enthusiastic subscription. The maximum issue price is set at HK$1,010 per share, expected to raise at least HK$55 billion, potentially setting the largest IPO record in Hong Kong this year, possibly surpassing CATL and becoming the largest tech IPO since Alibaba, with a planned listing on July 30.

XinYiSheng (Yi) is the world's second-largest high-speed optical module provider, securing a strong position in the short-distance, low-power segment through its LPO (Linear Pluggable Optics) strategy. Its 800G LPO product has passed NVIDIA's H100 platform certification and has become one of the mainstream solutions for short-to-medium-distance data center interconnect (DCI) networks. In addition to entering NVIDIA's supply chain, XinYiSheng is also deeply tied to hyperscale data center clients such as Amazon AWS and Microsoft.

TianFu Communication (Tian) is a leader in optical components, mastering vertical integration capabilities in fiber arrays (FAU), WDM components, and TO/BOX packaging. It is also a key supplier for NVIDIA's CPO switches. The company holds over 40% global market share in ceramic ferrules, over 50% in fiber arrays, and a leading global share in 1.6T optical engines.