From August 3rd to 7th, all three major A-share indices recorded gains, with the technology and growth sector showing particular strength. The electronics sector saw a weekly turnover of 3,484.195 billion yuan, making it the market's hottest sector. Most of the top stocks by net main capital inflow were concentrated in AI computing-related areas like CPO, PCB, and semiconductors.

During this period, Tianfu Communication became a market hotspot, with a net main capital inflow of 5.951 billion yuan and a weekly gain of 34.89%. Shenghong Technology followed closely, with a net main inflow of 5.009 billion yuan and a 47.16% weekly gain. Guangxu Technology saw a net inflow of 3.082 billion yuan and a 19.42% weekly rise, while Hubei PCB attracted 2.137 billion yuan net inflow, gaining 21.32% for the week. However, the CPO sector leader, Zhongji Innolight Co.,Ltd., only rose 1.98% during the week and topped the Shanghai and Shenzhen markets with a net outflow of 3.353 billion yuan, indicating a clear divergence within the sector.

Renewed Volatility Strikes

On August 7th, Zhongji Innolight Co.,Ltd. experienced a sharp afternoon sell-off, with an intraday amplitude of 10%. The catalyst was a positive signal from US optical communications manufacturer Applied Optoelectronics (AAOI.O) in its earnings call. Management highlighted strong AI infrastructure demand, with customer demand exceeding their current supply capacity by approximately 20% to 40%. They projected 800G revenue to nearly quintuple quarter-over-quarter in Q3, expect the first 1.6T product to complete customer certification within weeks and ship in late Q3, and revealed over $200 million in 1.6T orders. Analysts suggest that AAOI's domestic US production capacity is a key selling point, potentially giving it an advantage in client competition. While AAOI's capacity expansion won't be immediate, meaning no short-term impact on Zhongji Innolight Co.,Ltd., its large-scale expansion could eventually erode some market share over the long term.

Earlier, on the night of July 28th, Zhongji Innolight Co.,Ltd. Vice President and Board Secretary Wang Jun stated in a conference call that all major customer orders now cover the full year of 2026, with some extending into 2027. Delivery plans for 2027 products like 800G, 1.6T, 2.4T, and NPO have been broken down into monthly schedules, with strong demand certainty and significant growth rates across categories.

The impact on Zhongji Innolight Co.,Ltd. also stems from a draft ban being considered by the US Federal Communications Commission (FCC) to prohibit US imports of new models of Chinese data center components, including optical modules. On August 5th, Zhongji Innolight Co.,Ltd. responded that it had noted the market information and confirmed that the FCC has not yet issued any restrictive documents in this area. The company declined to comment on the potential impact of such a ban. This timely response helped ease the sharp decline seen on that day, with the stock price closing down 7.27% after opening nearly 14% lower. Notably, the stock's trading volume reached 67.511 billion yuan that day, surpassing its own historical record of 59.77 billion yuan set on July 30th.

The market's strong reaction is closely tied to Zhongji Innolight Co.,Ltd.'s business structure. Its 2025 annual report shows that optical communication transceiver modules account for 97.95% of its main business, and overseas revenue makes up 90.58% of the total. This means any policy changes affecting overseas markets can directly impact the company's performance.

Prominent Institutions Remain Bullish

Data from the Hong Kong Stock Exchange on August 7th showed that JPMorgan Chase increased its stake in ZJ INNOLIGHT (03308.HK) H-shares from 13.48% to 15.02% on August 4th, with an average purchase price of HKD 1150.8522. Data from August 6th showed that Goldman Sachs increased its long position in ZJ INNOLIGHT H-shares from 11.65% to 12.19% on August 3rd. Additionally, JPMorgan Chase raised its long position in ZJ INNOLIGHT H-shares from 5.6% to 13.72% on July 31st. These moves indicate that major international investment banks are acting on their bullish view of Zhongji Innolight Co.,Ltd..

In a report on August 3rd, Nomura Oriental International Securities noted that despite the recent pullback in AI infrastructure stocks, the company's core growth drivers for 2026-2028 remain unchanged. With the upgrade to 1.6T and Silicon Photonics (SiPh) optical modules, the commercialization of 2.4T coherent optical modules and Near-Package Optics (NPO) from 2027, and the continued expansion of the 3.2T optical module, eXtreme Density Pluggable Optics (XPO), and Co-Packaged Optics (CPO) markets, easing upstream supply bottlenecks should benefit 800G/1.6T optical module shipments in 2027. The commercialization of 2.4T modules is also expected to accelerate from next year. As a result, the firm maintains its 'Buy' rating and raised its target price to 1,375 yuan.

In a July 22nd report, BOCOM International Securities pointed out that the revenue share of communication network chips from upstream chip leaders Nvidia and Broadcom is steadily increasing. It estimates the global AI communication network chip market could reach $107.5 billion in 2026 and $154.9 billion in 2027. As the global leader in AI data center optical modules, Zhongji Innolight Co.,Ltd. is likely to continue benefiting from the growing role of communication networks in AI infrastructure. The company's first-mover advantage in 1.6T products could further increase its market share in 2026. Based on this, BOCOM International initiated coverage with a target price of 1,600 yuan, representing a 32x target price-to-earnings ratio based on 2027 earnings.