Shares in the optical communication sector continued their decline. At the time of writing, TRIGIANT (01300) shares were down 5.96% to HK$4.42, while TIME INTERCON (01729) shares fell 5.03% to HK$15.66. CIG (06166) shares dropped 3.05% to HK$117.9, and YOFC (06869) shares decreased by 2.59% to HK$225.4.

The downward pressure is linked to a recent report from the prominent AI industry analysis firm, SemiAnalysis. The report suggests that the implementation timelines for both 800VDC and Co-Packaged Optics (CPO) are likely to be delayed. Regarding CPO's mass production progress, the report indicates that shipment volumes in 2027 will be significantly lower than previous optimistic market forecasts, with the timeline for large-scale production potentially pushed back to 2028 or even 2029.

Adding to the sector's woes, a cluster of concerns has recently intensified, focusing on AI's financial performance, capital expenditure structures, and liquidity. Market expectations suggest the tech industry may need to issue as much as $1.5 trillion in new debt over the coming years to finance AI infrastructure, while free cash flow at some major cloud platforms is plummeting sharply.

Furthermore, the rapid rise in expectations for a more restrictive monetary policy from the U.S. Federal Reserve is poised to directly pressure debt sustainability, valuations for growth stocks, and the high-leverage risks prevalent within the AI sector.