As the market focuses on the high prosperity of the AI computing power industry chain, some seemingly &#34;traditional&#34; industries are quietly reaching a turning point due to supply being squeezed by AI. Optical fiber and cable is one of the most typical cases.
The latest change is that the shortage and price increase signals in the optical fiber industry are becoming increasingly clear. Guotai Junan stated in a report on February 5 that there is a structural contradiction of &#34;high-priced cash hard to obtain&#34; for mainstream G.652D optical fibers in China, with longer delivery times. Prices are expected to rebound in the second half of 2025 and further rise in January 2026, with the upcoming procurement by operators and pre-holiday stocking before the Spring Festival likely to drive continued price increases.
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The core incremental demand from the demand side comes from internal interconnection within AI data centers and DCI (Data Center Interconnect). Guotai Junan cited CRU, stating that global demand for optical fibers and cables in data centers is expected to increase by 75.9% year-on-year in 2025, and the proportion of optical fiber demand driven by AI scenarios is expected to rise from less than 5% in 2024 to 35% in 2027. The overseas &#34;lock-in&#34; is also intensifying the tension, with Corning signing a long-term supply agreement worth up to $6 billion with Meta and expanding production to support its AI data center construction.
For investors, optical fiber is more like &#34;storage that cannot be perfectly replicated, but has 'small storage'.&#34; Shenwan Hongyuan Research on February 11 positioned optical fiber as &#34;traditional part repair + short-term AI business progress expected upward option,&#34; believing that the supply of the industry has continued to decline since 2023, confirming the bottom of the cycle, but the sector's PB is at a historical high, and the source of income is more inclined to fundamental realization and structural upgrades rather than simple valuation repair.
<h2>The Template Provided by Storage: How High Prosperity &#34;Squeezes Supply&#34; and Overflows to Traditional Categories</h2>
Shenwan Hongyuan Research reviewed that the core of the storage market in 2025 lies in the structural changes in AI training demand driving capacity to be prioritized for high-margin products like HBM, while traditional DRAM and NAND capacities are being squeezed out. AI inference has also raised broad demand for storage, and the dramatic changes in supply and demand have led to a double impact on prices and valuations.
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This mechanism is summarized into four rules of &#34;high prosperity overflow&#34;:
<blockquote>
First, performance money comes from the early turning point after supply is squeezed out, while valuation money comes from the repair expectations after previous valuations are at historical median or low levels;
Second, the overflow market also has a bottom line, requiring confirmation of a clear cycle bottom, controllable demand downside risks, and sufficient supply clearance;
Third, the win rate is not inherently high and requires Alpha add-ons such as &#34;bargaining power, production expansion bottlenecks, and the possibility of entering high prosperity industries&#34;;
Fourth, the overflow structural valuation is relatively difficult to break through historical centers in the long term, and after the cost-effectiveness declines, it is easier to turn to high-level fluctuations.
</blockquote>
<h2>Supply Side: Long Expansion Cycle for Optical Rods, Capacity Structure Adjustment Compresses Traditional Supply</h2>
The &#34;rigid supply&#34; of optical fibers is the foundation of the current price increase narrative. Guotai Junan Securities stated that the core bottleneck in the optical fiber industry chain lies in the preparation of optical fiber preform (optical rod), with an expansion cycle lasting 2 to 3 years. Since the last industry downturn, the long-tail production capacity of optical rods has basically been cleared, and the expansion decisions of existing manufacturers are generally cautious, resulting in slow global production capacity growth and a rigid overall supply.
At the same time, production capacity is structurally tilted towards high-demand, high-margin products. Shenwan Hongyuan Research pointed out that conventional capacity is shifting towards high-profit products corresponding to AI data centers and drone demand, while traditional optical fiber capacity is being squeezed, and the upstream optical rod expansion cycle is relatively long, creating bottlenecks in capacity adjustment.
Guotai Junan also mentioned that leading manufacturers, while ensuring system performance, continue to shift conventional G.652D capacity towards high-profit products such as G.654.E ultra-low loss, G.657A2, multi-core, and hollow-core, forming a structural imbalance of &#34;insufficient high-end capacity and squeezed traditional capacity.&#34;
<h2>Price Increases Are Happening: G.652D Shortage Raises Spot Prices and Delivery Times</h2>
The direct carriers of price increases are the prices of scattered fibers and delivery cycles. Guotai Junan stated that the scattered fiber market is dominated by G.652D, with subdued demand in the first half of 2025 putting pressure on prices. After hitting bottom in June 2025, prices are expected to rebound, and in the second half of the year, as demand for overseas G.657A2 significantly increases, production capacity will switch. The supply of G.652D will decrease, and delivery times will lengthen. In the fourth quarter of 2025, mainstream G.652D ordinary optical fibers are expected to see significant price increases and supply tightness, with some large manufacturers unable to meet orders from inventory and turning to external procurement.
In terms of pricing, Guotai Junan stated that by the end of 2025, the quoted price for G.652D scattered fibers has risen to 24.0 to 25.0 yuan per core kilometer, with an annual cumulative increase of over 50%. The latest scattered fiber prices in January 2026 have exceeded 30 yuan per core kilometer, approaching 40 yuan per core kilometer, more than &#34;doubling&#34; compared to the optical fiber conversion prices during the operators' centralized procurement in 2025. They believe that with the upcoming centralized procurement by telecom and mobile operators, as well as increased industry stocking demand before the Spring Festival, prices may continue to rise, and domestic major clients are also expected to accept price increases, a logic confirmed amid sector fluctuations.
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<h2>Demand Side: Computing Power Competition Pulls Optical Fiber from &#34;Telecom Cycle&#34; to &#34;Data Center Cycle&#34;</h2>
The cyclical attributes tied to traditional telecom investment have not disappeared, but AI is reconstructing marginal demand. Guotai Junan stated that the rigid demand for ultra-high bandwidth and low-latency transmission from intelligent computing centers makes them the core engine for optical fiber demand growth. A typical 10,000-card GPU cluster requires tens of thousands of core kilometers of optical fiber just for internal server interconnection, and the optical fiber demand of a single intelligent computing center can reach several times or even ten times that of a traditional data center.
Data is also reinforcing this direction. Guotai Junan cited CRU, stating that global demand for optical fiber and cables in data centers is expected to increase by 75.9% year-on-year in 2025, and pointed out that the North American market is experiencing the fastest demand growth driven by data centers. Guolian Minsheng noted in its weekly report on February 2 that high-quality optical fiber products from leading companies are in short supply, with some order production cycles extending to several months. Factors such as AI data center construction are resonating, leading to a concentrated upward demand for various optical fibers, and the expansion cycle of optical fiber preforms, which is about 2 years, has exacerbated the supply-demand mismatch
<h2>&#34;Where is the 'Upward Option': Going Overseas, Giant Lock-in Volume, and the Industrialization Progress of Hollow-Core Fiber</h2>
Optical fibers are not only increasing in price but also transitioning from &#34;quantity&#34; to &#34;quality.&#34; Guotai Junan stated that the demand for specialty and multimode optical fibers continues to grow, and hollow-core fibers are regarded as an important direction for data centers due to their advantages of low latency and high capacity. They disclosed the progress of several manufacturers: Yangtze Optical Fibre and Cable Company has achieved a minimum loss of 0.05dB/km for hollow-core fibers and has won the bid for the Guangdong Unicom hollow-core fiber centralized procurement project with Hengtong Optic-Electric, totaling 82 core kilometers, with a centralized procurement price not exceeding 33,000 yuan per core kilometer; Zhongtian Technology is participating in the hollow-core fiber pilot project for UAE operator e&amp;, with test results showing a transmission delay reduction of about 30% compared to traditional optical fibers.
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On the overseas side, Guotai Junan stated that both Microsoft and AWS are laying out hollow-core fibers. AWS Core Network Vice President Matt Rehder indicated that hollow-core fibers may replace traditional fibers as the standard choice for long-distance trunk networks in the future, but currently face supply shortages. The certainty of demand is also reflected through orders and capital expenditures: Guotai Junan and Guolian Minsheng both mentioned that Corning has signed a supply agreement with Meta worth up to $6 billion, and Guolian Minsheng cited Tencent Technology stating that Meta disclosed a capital expenditure of $135 billion for 2026.
Going overseas has provided another clue to prosperity for domestic manufacturers. Guotai Junan stated that by December 2025, the total export of optical cables, optical fibers, and optical rods will reach 41,000 tons, a year-on-year increase of 6.5%, with an export value of $450 million, a year-on-year increase of 41.8%; the total export for the entire year of 2025 will reach 454,000 tons, a year-on-year increase of 11.1%, with a total export value of $4.475 billion, a year-on-year increase of 44.1%, and believes that going overseas has become an important profit growth point for industry enterprises.
<h2>Can it Become the &#34;Next Storage&#34;: Short-term Winning Probability Increases, but More Tests on Valuation and Sustainability</h2>
From a &#34;mechanism&#34; perspective, optical fibers possess elements that align with storage: The concentrated explosion of AI demand, supply-side bottlenecks in optical rod expansion, and structural adjustments in production capacity squeezing traditional model supply have already been reflected in price increases and delivery times, with high-end products and overseas markets providing additional upward options. Shenwan Hongyuan Research also judges that optical fibers have a &#34;high short-term winning probability&#34; and views the expectation of high-end products entering North America as one of the upward options.
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However, unlike storage, the valuation starting point of the optical fiber sector is not low. Shenwan Hongyuan Research clearly pointed out that the PB of the optical fiber sector is at a historical high, mainly due to the previous market pricing of some companies' optical connection businesses. This means that the market is more reliant on the realization of price increases and the continuous strengthening of fundamental visibility. Once price increases spread or demand visibility fluctuates, it is more likely to shift from an upward trend to high-level fluctuations.
On the risk side, Shenwan Hongyuan Research points out risks including AI technology advancements falling short of expectations, industry supply expansion exceeding expectations, and demand decline exceeding expectations; Guotai Junan also highlights risks such as intensified technological updates and competition, fluctuations in raw material prices, and market demand fluctuations.
For investors, the key variable determining whether optical fibers can break out of the &#34;storage-style&#34; market will be whether price increases can surpass centralized procurement pricing, whether supply bottlenecks continue to be effective, and whether high-end products and overseas expansion can extend the prosperity from &#34;shortage&#34; to &#34;structural upgrade.&#34;

The demand for AI computing power is reshaping the fiber optic industry, with logic similar to the super cycle of storage chips in 2025. Guotai Junan Securities stated that due to the shift of high-end capacity towards AI data centers, the supply of traditional G.652D fiber has been squeezed, and prices have doubled compared to last year's procurement price. The long expansion cycle of optical rods and the overseas "lock-in" effect have highlighted the supply-demand contradiction. Shenwan Hongyuan believes that although the sector's valuation is relatively high, the industry is transitioning from a cyclical bottom to a structured prosperity through price increases and the export of high-end products

Will optical fiber be the next storage?