Optical communication stocks were among the biggest decliners in the Hong Kong market. As of press time, CIG (06616) fell 8.82% to HK$67.7. YOFC (06869) dropped 7.61% to HK$182. FIT HON TENG (06088) declined 6.57% to HK$6.83. TIME INTERCON (01729) decreased 3.38% to HK$15.45.

Market sentiment was affected by recent developments. In some distribution channels, prices for DDR4 and DDR5 memory modules have seen significant reductions, which market participants interpret as a signal that the memory market is beginning to correct. Additionally, U.S. memory chip stocks recently experienced heavy selling due to demand concerns sparked by Google's TurboQuant memory optimization technology.

Morgan Stanley believes that market concerns over factors such as rising capital expenditures, potential demand destruction, and the impact of Google's memory optimization technology have been overinterpreted.

Notably, UBS previously expressed concerns about fiber optic capacity expansion, worrying that aggressive expansion could trigger a new round of oversupply. China Securities Co., Ltd. holds a different view, suggesting that after the previous cycle of oversupply, manufacturers are likely to approach expansion more rationally this time. In fact, since 2020, the industry has generally been in a phase of consolidation with little expansion. The expansion cycle for fiber preforms is at least one year or more. Furthermore, technical requirements for products like G654E, G657, multimode, and hollow-core fibers are high, posing significant barriers to entry that new competitors cannot quickly overcome.