Shares of Chinese optical module makers, including Zhongji Innolight, Eoptolink Technology, and Suzhou TFC Optical Communications, experienced a significant slump on Wednesday. This downturn followed a Reuters report detailing plans by the Trump administration to ban US imports of new models of Chinese data center components, specifically optical transceivers critical for AI data centers. The CSI300 Telecommunication Services Index tumbled as much as 9% in early trading, reflecting widespread concern among investors.
The proposed ban, aimed at preventing Chinese firms from potentially stealing data, installing malware, or disrupting service in US data centers, threatens companies highly dependent on export markets. For instance, Eoptolink Technology, which generates 96% of its sales from overseas, saw its shares tumble 10%, while TFC Optical, also heavily reliant on foreign markets, slumped approximately 6%. Zhongji Innolight, a major player, shed roughly 10% in both Shanghai and Hong Kong, noting that 62% of its Q1 revenue came from the US.
While the news sparked a savage sell-off in China's AI hardware stocks, some analysts suggest the market might be overreacting. Jefferies indicated a low risk of the ban materializing under Trump, viewing it as a US negotiation tactic ahead of President Xi's September visit. However, experts like Zhan Kai of Dacheng law firm noted that the US policy aligns with efforts to contain China's technological advancement and address trade imbalances. This development highlights the escalating tensions and mutual supply chain risks between the two economic powers.
