According to the latest report from Kaiyuan Securities, based on Broadcom's (AVGO.US) latest financial report, the demand for AI custom acceleration cards from the existing three major clients remains high, and the addition of a fourth major client will bring even stronger demand for XPUs. Compared to electrical switches, the advantage of OCS (Optical Circuit Switch) lies in the elimination of the need for optoelectronic signal conversion and the corresponding data packet processing, which can significantly reduce latency and power consumption, as well as lower the probability of system failures. As data centers evolve towards high bandwidth, low latency, and low energy consumption, OCS is expected to address many limitations faced by OEO switches, and attention should be paid to the evolution of related technologies and industry development. Recommended targets include Zhongji Innolight (300308.SZ), Eoptolink (300502.SZ), Envicool (002837.SZ), and TFC (300394.SZ).
<h2>Key Points from Kaiyuan Securities:</h2>
Broadcom (AVGO.US) adds a major client with strong demand for XPUs, and the new generation of switching chip TH6 supports network cluster development
According to Broadcom's latest financial report, the existing three major clients continue to have high demand for AI custom acceleration cards, and the addition of a fourth major client will bring even stronger demand for XPUs, with volume shipments expected to start in 2026. The $1 billion AI rack orders anticipated from the fourth major client are expected to be completed in the third quarter of 2026.
Broadcom has launched the new generation high-speed switching chip Tomahawk6 (102TB), which can reduce the network architecture from three layers to two layers under the same computing cluster scale, significantly lowering latency and power consumption. The router Jericho4 (51.2T) can handle a cluster of 200,000 nodes.
OCS may provide new solutions for the architecture of large-scale data centers
Optical Circuit Switch (OCS) refers to switching devices based on all-optical signals, which work by configuring an optical switching matrix to establish optical paths between any input and output ports for signal switching. Existing technological paths include MEMS solutions, digital liquid crystal technology, optical waveguide solutions, etc.
Compared to electrical switches, the advantage of OCS is that it does not require optoelectronic signal conversion and the corresponding data packet processing, which can significantly reduce latency and power consumption, as well as lower the probability of system failures. Additionally, OCS does not require frequent iterations of port rates; seamless interconnection of cross-generation devices can be achieved through simple optical path redirection, greatly extending hardware lifespan.
The OCS technology solution used in data centers, combined with high-speed optical modules, optical circulators, or bidirectional WDM devices, forms a highly efficient, low-cost, and high-benefit large-scale optical switching system, providing new solutions for the architecture of large-scale data centers.
OCS technology also brings some new challenges, including high upfront deployment costs, insertion loss, and reconfiguration latency. With the development of ultra-large-scale data centers and high-density AI clusters, OCS technology is expected to play an important role in the future, while the penetration rate of liquid cooling may gradually increase.
OCS may bring new growth opportunities for optical communication, liquid cooling, and OCS switch OEMs
Traditional OEO (Optical-Electrical-Optical) switches face several key challenges, such as bandwidth limitations, power consumption issues, latency problems, and insufficient scalability. They possess core advantages such as rate independence, high bandwidth capability, power efficiency, reduced latency, and high scalability. As data centers evolve towards high bandwidth, low latency, and low energy consumption, OCS can complete signal routing directly in the optical domain without the need for optical-electrical conversion. This direct optical switching method is expected to address many limitations faced by OEO switches, offering strong competitive advantages in performance, energy efficiency, and scalability, necessitating attention to the evolution of related technologies and industry development.
Recommended targets: Zhongji Innolight, Eoptolink, Envicool, TFC, Zhongtian Technology, Hengtong Optic-Electric;
Beneficiary targets: Guangku Technology, Tengjing Technology, Changfei Fiber Optics, Juguang Technology, Guangxun Technology, Taicheng Technology, Dekeli, Saiwei Electronics, Shenling Environment, Yinlun Co., Ltd., Tongfei Co., Ltd., Goaland, Kehua Data, etc.
Risk warning: AI development not meeting expectations, intensified industry competition, Sino-U.S. trade friction, etc

300394

300499

300502

300308

002837

AVGO

KaiYuan Securities released a research report pointing out that Optical Circuit Switches (OCS) are expected to address the limitations of OEO switches. As data centers evolve towards high bandwidth, low latency, and low energy consumption, OCS will encounter new opportunities. Broadcom's addition of major clients will drive XPU demand, with an expected realization of $1 billion in AI rack orders by 2026. It is recommended to pay attention to related companies such as Zhongji Innolight, Eoptolink, Envicool, and TFC

Zhitong

Goaland

Eoptolink

Zhongji Innolight

Envicool

Broadcom

Open Source Securities: OCS may accelerate development, with new opportunities in optical communication and liquid cooling