Wall Street's Take on the US Optics Module Ban: A Direct Boon for US Optics Communication, but the Ban May Not Be Easy to Implement

August 5th. The news that the United States plans to restrict the import of Chinese AI data center optical components is becoming a new trading theme in the optical module sector.

Overnight, the US stock market reacted first. Stimulated by the relevant news, stocks of optical communication targets such as Marvell, Coherent, Lumentum, Applied Optoelectronics, Corning, etc., surged collectively, and funds quickly flowed into the US domestic optical communication supply chain. The A-share optical module chain is under pressure today, with companies such as Acacia Communications, Neophotonics, and Fibrehome Telecommunication becoming the market's focus due to their relevance to the North American AI supply chain.

The latest Wall Street views are also starting to diverge. Both Morgan Stanley and Citigroup released brief comments on August 4th, but the emphasis of the two is not the same.

Morgan Stanley is more focused on the benefits to the US optical communication supply chain. It believes that if the US ultimately restricts the entry of Chinese transceivers into the AI data center supply chain, non-Chinese suppliers will have an opportunity to gain market share, with Coherent being the clearest beneficiary. Companies such as AAOI and Fabrinet are also expected to take on some of the incremental demand. Lumentum's logic is relatively indirect, mainly stemming from the possibility of an extended EML laser supply tightness cycle, where concerns in the market about supply relief and peak margin pressures may be delayed.

However, Morgan Stanley also acknowledges the high difficulty of implementing the ban. The current capacity of non-Chinese suppliers is insufficient to meet AI capital expenditure demand, and key materials such as InP substrates still involve the Chinese supply chain. If the US restricts Chinese optical modules, China may also retaliate at the critical materials level. Morgan Stanley even mentions that a potential solution may be for Chinese cloud providers to increase their purchases of US optical communication components.

Citigroup's judgment is more cautious. It believes that this potential ban is unlikely to be a simple, clear rule. Seven of the top ten global transceiver companies are Chinese enterprises, supplying over 50% of high-speed optical modules to major US cloud providers; meanwhile, the AI optical module supply chain remains tight, with Chinese manufacturers having cost, product iteration, and delivery advantages. Citigroup expects that under real supply and demand constraints, the policy will likely include certain exemptions.

Regarding Chinese targets, Citigroup's impact ranking is as follows: FiberHome Telecommunication will be indirectly affected the most, Oz Optics will be in the middle, and Neophotonics will be more directly impacted by business attributes. FiberHome Telecommunication is mainly a passive component supplier, with overseas optical module companies as direct customers, so the short-term impact is controllable; Neophotonics, on the other hand, has about 88% of its revenue coming from Thailand in 2025, providing overseas production capacity buffer. What needs to be truly cautious about is whether US policy will further cover the production capacity of Chinese-background companies in third countries.

This also explains the market's division: US stock trades transfer expectations, while A-share trades focus on North American client compliance risks and valuation discounts.

From two reports, the current consensus on Wall Street is clear: if the ban is implemented, it will have a short-term impact on the revaluation of the US optical communication chain. The disagreement lies in whether order migration can proceed smoothly. AI data center construction is still accelerating, and cloud providers require a stable, low-cost, high-speed supply chain. Policies can alter expectations, but capacity, certification, yield, and material supply will determine the final outcome.

For the optical module sector, the market is now focused not only on the ban headlines but also on three key factors: whether the final rule will cover third-country capacity, whether North American cloud providers will reallocate orders, and whether Chinese suppliers' overseas factories can continue to serve as a buffer.