Will optical fiber be the next storage?

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When the market is focused on the high prosperity of the AI computing power industry chain, some seemingly "traditional" industries are quietly approaching an inflection point as their supply is squeezed by AI. Optical fiber and cable is the most typical example among them.

The latest development is that the signals of shortage and price increases in the optical fiber industry are becoming increasingly apparent. Guotai Haitong stated in a report on February 5 that the mainstream domestic G.652D loose fiber is facing a structural contradiction of "high prices, cash difficulty in securing goods," with longer delivery periods. Prices rebounded in the second half of 2025 and further increased in January 2026. The upcoming operator centralized procurement and pre-Spring Festival stockpiling may push price increases to continue.

The core incremental demand on the demand side comes from AI data center internal interconnection and DCI (data center interconnect). Guotai Haitong cited CRU, stating that global data center optical fiber and cable demand will increase by 75.9% year-on-year in 2025, and that the proportion of optical fiber demand driven by AI scenarios is expected to rise from less than 5% in 2024 to 35% in 2027. Overseas "locked-in volume" is also intensifying tensions. Corning signed a long-term supply agreement worth up to $6 billion with Meta and will expand capacity to support its AI data center construction.

For investors, optical fiber is more like "storage without perfect replication, but with 'small storage' characteristics." Shenwan Hongyuan Research on February 11 positioned optical fiber as "partial restoration of traditional sectors + short-term upward option for AI business progress expectations," believing that since 2023, supply in the industry has continued to decline, and the cyclical bottom is confirmed. However, the sector's PB is at a historical high, with returns more inclined to fundamental realization and structural upgrades, rather than merely valuation recovery.

Template Provided by Storage: How High Prosperity "Crowds Out Supply" and Spills Over into Traditional Categories

Shenwan Hongyuan Research reviewed and stated that the core of the 2025 storage market is that the structural change in AI training demand drives capacity toward high-margin products like HBM, crowding out traditional DRAM and NAND capacity; AI inference also raises broad-spectrum demand for storage, leading to dramatic supply-demand changes that bring both price and valuation surges.

This mechanism is summarized into four rules of “prosperity spillover”:

First, performance gains come from an inflection point brought ahead by squeezed supply; valuation gains come from restoring prices when initial valuations are historically median or low;

Second, spillover trends have a bottom line—they require confirmation that the cyclical bottom is clear, that demand downside risk is controllable, and that supply clearance is sufficient;

Third, winning is not naturally guaranteed—it requires "bargaining power, production expansion bottlenecks, and the potential to penetrate into high prosperity sectors" as alpha factors;

Fourth, spillover structure valuations are difficult to break through historical averages over the long term; with declining cost-effectiveness, trends are more likely to shift toward high volatility at elevated levels.

Supply Side: Long Production Expansion Cycle for Fiber Preforms, Capacity Structure Adjustments Compress Traditional Supply

The "rigidity of supply" of optical fiber is the foundation of the current price increase narrative. Guotai Haitong states that the core bottleneck in the optical fiber industry chain is the preparation of fiber preforms, with expansion cycles as long as 2 to 3 years. Since the last industry downturn, long-tail preform capacity has basically been cleared. Incumbent manufacturers are generally cautious about capacity expansion decisions, resulting in slow global growth of fiber preform capacity and overall rigid supply.

Meanwhile, capacity is structurally tilted toward high-demand, high-margin products. Shenwan Hongyuan Research pointed out that conventional capacity is shifting toward high-profit products for AI data centers and drone demands, crowding out traditional optical fiber capacity. Since the upstream fiber preform expansion cycle is long, capacity adjustment faces bottlenecks.

Guotai Haitong also stated that leading companies, while ensuring contractual obligations, are continuously shifting conventional G.652D capacity toward high-profit products like G.654.E ultra-low loss, G.657A2, multicore, and hollow core, resulting in a structural imbalance with "insufficient high-end capacity and squeezed traditional capacity."

Price Increases Underway: G.652D Shortage Elevates Spot Prices and Delivery Times

The direct carrier of price increases is the price and delivery cycle of loose fiber. Guotai Haitong states that most of the loose fiber market is G.652D. In the first half of 2025, weak demand led to price pressures. Prices bottomed in June 2025 and rebounded. In the second half, as overseas demand for G657A2 and others surges, capacity switches, G.652D supply decreases and delivery times increase. In the fourth quarter of 2025, mainstream G.652D ordinary optical fiber saw significant price increases and tight supply. Some major manufacturers' inventories could not meet orders and turned to external sourcing.

On the price front, Guotai Haitong states that by the end of 2025, G.652D loose fiber quotations have risen to 24.0–25.0 yuan/core kilometer, with cumulative annual price increases exceeding 50%, and by January 2026, the latest loose fiber prices exceed 30 yuan/core kilometer, approaching 40 yuan/core kilometer—more than double the calculated price during the 2025 operator centralized procurement. They believe that with the operator purchases and pre-Spring Festival stockpiling, prices may continue to rise, and major domestic customers are expected to accept the increases, confirming the logic amidst sector fluctuations.

Demand Side: The Competition for Computing Power Pulls Optical Fiber from the "Telecom Cycle" to the "Data Center Cycle"

The cyclical attributes tied to traditional telecom investments have not disappeared, but AI is restructuring marginal demand. Guotai Haitong states that intelligent computing centers’ rigid demand for ultra-high bandwidth and low-latency transmission make them the core driver for optical fiber demand growth. A typical 10,000-card GPU cluster requires tens of thousands of core kilometers of optical fiber just for internal server interconnection, with the optical fiber demand of a single intelligent computing center potentially being several times or even ten times that of a traditional data center.

Data further supports this direction. Guotai Haitong, citing CRU, states that global data center optical fiber and cable demand will grow by 75.9% year-on-year in 2025, and highlights North America as growing fastest under data center drive. Guolian Minsheng stated in its February 2 weekly report that top companies’ premium optical fiber products are in short supply, some delivery cycles for orders are extended to several months, and factors like AI data center construction resonate to drive concentrated demand increases in various types of optical fiber. The 2-year expansion cycle for optical fiber preforms further exacerbates supply-demand mismatches.

Where is the "Upward Option": Overseas Expansion, Giant Locked-in Volumes, and Hollow Core Fiber Industrialization Progress

Optical fiber is not only rising in price, but also advancing from “quantity” to “quality.” Guotai Haitong states specialty and multimode fiber demand continues to grow, with hollow core fiber—due to its low latency and large capacity advantages—seen as an important direction for internal data center applications. Multiple manufacturers’ progress has been revealed: Yangtze Optical Fiber and Cable’s hollow core fiber has minimum loss of 0.05dB/km, and along with Hengtong Optic-Electric, won bids for Guangdong Unicom’s hollow core fiber centralized procurement, totaling 82 core kilometers at per-core kilometer prices not exceeding 33,000 yuan; Zhongtian Technology participated in UAE operator e&'s hollow core fiber pilot, with test results showing about 30% lower transmission delay compared to traditional fiber.

On the overseas side, Guotai Haitong stated that Microsoft and AWS are both deploying hollow core fiber. AWS core network vice president Matt Rehder said hollow core fiber may become the standard for long-distance trunk networks in the future, but currently faces insufficient supply. Demand certainty is also evident through orders and capital expenditure: Both Guotai Haitong and Guolian Minsheng referred to the $6 billion supply agreement signed between Corning and Meta, and Guolian Minsheng citing Tencent Technology reported Meta disclosed 2026 capital expenditures of $135 billion.

Overseas expansion provides another prosperity clue for domestic manufacturers. Guotai Haitong reported that in December 2025, exports of optical cables, fibers, and fiber preforms totaled 41,000 tons, up 6.5% year-on-year, with export value at $450 million, up 41.8%. For the whole of 2025, total exports were 454,000 tons, up 11.1% year-on-year, totaling $4.475 billion, up 44.1%. They believe overseas markets have become an important profit growth point for industry companies.

Can It Become "The Next Storage": Short-term Winning Probability Rises, But Valuation and Sustainability Are Bigger Tests

From the “mechanism” perspective, optical fiber has factors aligning with storage: AI demand surges, supply side faces bottlenecks in fiber preform expansion, capacity structure adjustments squeeze traditional models’ supply, price increases already evident in prices and delivery times, plus high-end products and overseas markets offer extra upward options. Shenwan Hongyuan Research accordingly judges optical fiber as "high short-term winning probability," and views the expectation of high-end products entering North America as one of the upward options.

But unlike storage, starting valuations for the optical fiber sector are not low. Shenwan Hongyuan Research explicitly notes that the optical fiber sector's PB is at a historical peak, mainly due to earlier market pricing of certain companies’ optical interconnect businesses. This means market trends rely more on the realization of price increases and persistent strengthening of fundamentals’ visibility. Once price increases spread or demand visibility fluctuates, trends are more likely to shift from upward to high-level volatility.

On the risk side, Shenwan Hongyuan Research points out risks including slower-than-expected AI technology progress, greater-than-expected industry supply expansion, and greater-than-expected demand decline; Guotai Haitong also warns of risks such as technology updates and intensified competition, raw material price volatility, and market demand fluctuations.

For investors, the key variable determining whether optical fiber can achieve a "storage-like" market will be whether price increases can transcend centralized procurement pricing, whether supply bottlenecks continue to be effective, and whether high-end products and overseas expansion can shift prosperity from "shortages" to "structural upgrades."

Risk Warning and DisclaimerThe market carries risks, and investment needs to be prudent. This article does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular situation. Investing based on this is at your own risk. ```