China Galaxy Securities: Computing power network construction boosts demand for optical fiber, tight supply and demand spawned a boom

The Zhitong Finance App learned that China Galaxy Securities released a research report saying that the executive meeting of the State Council studied the construction of a computing power network and proposed strengthening the monitoring and scheduling of computing power resources and the construction of a backbone optical fiber network. Computing power network construction resonates with AI demand, boosting fiber demand across the board. Whether it is the expansion of the backbone layer of the computing power network or the upgrade of the optical interconnection architecture within the data center, it is opening up large incremental space for the optical fiber industry; currently, the optical fiber market is in a structural shortage stage where demand growth far exceeds supply release. The bank believes that this supply and demand gap may continue to expand, and the optical fiber sector is gradually switching from a traditional cyclical telecommunication circuit to a computing power infrastructure circuit with high growth attributes.

The main views of China Galaxy Securities are as follows:

The conference pointed out that the computing power network is the basic support for the development of artificial intelligence

We must adhere to reasonable layout, standardization and order, further improve computing power infrastructure, actively promote R&D and application of key technologies and equipment, and build a multi-level networked computing power system. It is necessary to promote collaboration and integration of computing networks, strengthen the monitoring and scheduling of computing power resources and the construction of backbone optical fiber networks, strengthen the planning and connection of computing facilities, and speed up the implementation of projects such as direct green power connection and source network load storage. It is necessary to give better play to the role of the market mechanism, support enterprises to carry out scientific and technological innovation, resource integration and application promotion, and promote a better match between supply and demand.

Computing power network construction resonates with AI demand to comprehensively boost fiber demand

Currently, the construction of global computing power networks is entering an accelerated stage, and the explosive growth in demand for large-scale model training and inference is reshaping the demand structure of the entire optical communication industry chain. As a physical carrier for information transmission in computing power networks, the importance of optical fiber has been magnified as never before in this process. Within the cluster, GPUs require frequent large-scale parameter synchronization and gradient exchange, and the rapid growth of east-west traffic places high demands on network bandwidth and latency. After the speed of traditional copper cables exceeds 112 Gbps, the transmission distance continues to decline, and optical interconnections are speeding up penetration into shorter distances. As the single channel rate evolves from 400G to 800G, 1.6T, and even 3.2T, the iteration speed of optical modules has accelerated significantly, directly driving the demand for passive devices such as upstream optical fiber and FAU. Furthermore, the large-scale deployment of AI training clusters has caused the demand for interconnection bandwidth within data centers to grow exponentially, further increasing the demand for high-density, low-loss optical fibers. Therefore, whether it is the expansion of the backbone layer of the computing power network or the upgrade of the optical interconnection architecture within the data center, it is opening up a large incremental space for the optical fiber industry.

The supply and demand pattern continues to be tight, and the optical fiber industry ushered in a boom cycle

In terms of supply and demand, the optical fiber market is currently in a structural shortage stage where demand growth far exceeds supply release. On the demand side, AI capital support, represented by the four largest cloud vendors in North America, continued to increase, compounded by the acceleration of domestic computing power infrastructure, and the share of fiber demand in global data centers and DCI scenarios is rapidly rising. However, the supply side is constrained by the rigidity of the prefabricated fiber rod upstream of the core. As the core component of optical fiber costs, optical bars have a long production line construction, process verification, and yield climbing cycle. In the early stages, low price competition in the industry led most manufacturers to be cautious about expanding production. Currently, the production capacity utilization rate of the world's leading manufacturers of light sticks is at full capacity. Since the drawing speed of high-end optical fibers (such as G.657.A2 bend-resistant optical fibers, polarization-maintaining optical fibers, etc.) is lower than that of ordinary optical fibers, structural squeezing of production capacity has further exacerbated supply bottlenecks. We believe this gap between supply and demand may continue to widen. Among leading companies with a high self-sufficiency rate of prefabricated rods, the profit flexibility brought about by price increases will be fully unleashed, and the optical fiber sector is gradually switching from a traditional cyclical telecommunication circuit to a computing power infrastructure circuit with high growth attributes.

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