The CPO (Co-Packaged Optics) sector in the A-share market has been experiencing a rapid surge this year. As of April 10, the sector has gained 47.37% year-to-date. Leading stocks such as Zhongji Innolight, Eoptolink Technology, and TFC Optical Communication have seen their share prices rise by an average of over 800% in the past year, making this one of the market's most prominent trends.
CPO represents a new type of optoelectronic integration technology. In simple terms, it involves packaging optical modules and switch chips together. The strong performance of the CPO sector is not coincidental; it reflects both the inevitable hardware transformation in the AI era and the capital market's rational selection of high-quality technology assets. So, what is the logic behind this surge?
First, the explosion in AI computing power is driving a transformation in hardware architecture, making CPO a necessity. The rise of CPO is inextricably linked to the explosive growth of large AI models. As AI models iterate at an accelerating pace, the demand for computing power is growing exponentially, and traditional optical communication architectures can no longer keep up. CPO technology has emerged precisely to address this challenge.
To put it simply, traditional pluggable optical modules are like two departments working separately, constrained by issues such as power consumption and transmission rates, and are gradually falling behind. CPO technology, by contrast, is akin to moving these two departments into the same office. By co-packaging the optical module and the switch chip, it significantly shortens the signal transmission distance, fundamentally addressing the three key pain points: signal loss, latency, and power consumption.
From an industry perspective, the computing power race among AI giants has directly ignited demand for CPO. Leading global cloud providers and AI companies are increasing their investments in CPO. For instance, new computing infrastructure solutions announced at Nvidia's GTC conference have led market expectations for 1.6T optical module procurement in 2026 to be revised upward from 7 million units to 20 million units, underscoring CPO's central role in AI infrastructure. Against the backdrop of exponentially growing computing power demands, CPO has become a necessity, not an option, for AI infrastructure.
Second, the maturation of the domestic supply chain, combined with the landing of overseas orders, is moving the industry from a conceptual phase into a period of earnings realization. The core support for the CPO rally lies in the industry's transition from technological breakthroughs to capacity release. With substantial overseas orders consistently being secured, the sector is entering a high-growth phase characterized by tangible financial results. After years of technological accumulation, China's CPO supply chain has established a clear competitive advantage, forming a complete industrial ecosystem from upstream core components to downstream system integration. Leading companies like Zhongji Innolight and Eoptolink Technology hold leading positions in key segments. Leveraging their strong technical capabilities, they have become core suppliers for top global AI firms, boasting ample order backlogs.
Financial performance is the best evidence. For example, according to Zhongji Innolight's 2025 annual report, the company achieved operating revenue of 38.240 billion yuan, a year-on-year increase of 60.25%, and operating profit of 13.597 billion yuan, a surge of 124.74% year-on-year. This demonstrates a high degree of certainty in earnings growth.
Third, the sector aligns with the core theme of "New Quality Productive Forces," providing a solid foundation for valuation resonance. The continued strength of the CPO sector is further driven by its precise alignment with the development focus on New Quality Productive Forces, creating a triple resonance of industrial trends, policy support, and market consensus.
Developing New Quality Productive Forces is an intrinsic requirement and a key focus for achieving high-quality development. As an inevitable choice for upgrading AI computing infrastructure, CPO is an important tool for cultivating these new forces. The Central Economic Work Conference held late last year and this year's Government Work Report both explicitly called for "promoting the deep integration of technological innovation and industrial innovation." Breakthroughs in CPO technology can not only support AI computing upgrades but also drive the iterative advancement of high-end manufacturing segments like optical chips and advanced packaging, helping China transition from a manufacturing giant to a manufacturing powerhouse.
In the capital markets, CPO has already become a core anchor for the AI investment theme, with continuous inflows of capital from various sources creating a strong consensus.
Overall, the rapid ascent of the CPO sector is the inevitable result of the resonance between technological revolution, industrial upgrading, and national strategy. It not only marks the leap of Chinese tech companies from followers to leaders but also reflects the growth trajectory of core technology industries in the cultivation of New Quality Productive Forces. In the long term, with sustained explosive growth in AI computing demand, the strengthening of the domestic supply chain's advantageous position, and ongoing policy support, the CPO industry is poised for continued maturation.