AI Data Centers Drive Upside in YOFC Optical Fiber Demand; Capex Depends on Long-Term Order Commitments

Overview

This report is Goldman Sachs' conference note following a Hong Kong meeting with YOFC management. The discussion focused on optical fiber demand trends, price sustainability, capex plans, and the growth potential of hollow-core fiber applications. Management was generally upbeat, believing that AI data center buildouts will accelerate optical fiber demand and further strengthen pricing momentum.

Core views

The core views are: first, the strong increase in AI data center capex will support optical fiber demand growth in 2026-2028; second, improved demand should support optical fiber ASPs and margins, especially for overseas CSP projects; third, the company will not expand capacity blindly but will depend on clients' long-term demand commitments and LTA negotiations; and fourth, hollow-core fiber has strong application growth potential in DCI and supernode scenarios.

Analysis framework

The report is primarily a conference note based on communication with company management, and it extends Goldman Sachs' existing views on AI networking, optical connectivity, and optical networking component suppliers into the sector. The analysis focus is not on financial model updates, but on qualitative judgments about demand, pricing, capacity expansion constraints, and new product use cases.

Methodology notes

• management_meetingCEO visit / conference takeaways

  management interview notes

  By communicating with the company's president and management team, the report distills operating signals on demand trends, pricing, capex, and hollow-core fiber applications.

• sector_read_acrossAI networking read-across

  sector read-through

  The report maps YOFC management's positive view on AI data center optical fiber demand to opportunities across the AI networking and optical connectivity value chain, especially optical networking component suppliers.

• factor_frameworkGS Factor Profile

  Goldman Sachs factor profile

  The disclosure indicates that Goldman Sachs uses growth, financial returns, valuation multiples, and combined percentile ranks to compare stocks with the market and sector peers, but the report body does not provide YOFC's specific factor scores.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• YOFC Optical Fiber and Cable (6869.HK / 601869.SS)

  Core company in the conference takeaways; not covered

  Strengths

  Management is upbeat about optical fiber demand growth from AI data centers; overseas CSP projects may support ASPs and margins; hollow-core fiber is positioned among leading suppliers and has project growth targets.

  Weaknesses

  The report does not provide earnings forecasts, valuation, a target price, or a formal rating; the capex plan still depends on client LTA negotiations and long-term commitments.

  Comparison

  Compared with a typical optical fiber demand cycle, this growth driver is more concentrated in high-growth scenarios such as AI data centers, DCI, and supernode applications.

  Risks

  A slowdown in AI data center capex, weaker-than-expected LTA negotiations, softer pricing momentum, and slower-than-expected commercialization of hollow-core fiber.

• AI optical networking component suppliers

  Sector read-through beneficiaries

  Strengths

  Goldman Sachs believes that interconnectivity among GPUs is becoming more important in the inference era, and low-latency AI services should drive demand growth for optical networking components and accelerate the specification upgrade cycle.

  Weaknesses

  The report does not separately analyze order books, margins, or valuation changes for the relevant companies.

  Comparison

  The read-through names include Innolight, TFC Optical, Eoptolink, Landmark, and VPEC, all of which are rated Buy by Goldman Sachs.

  Risks

  Volatility in the AI infrastructure investment cycle, changes in the pace of specification upgrades, intensifying competition, and uncertainty around customer order execution.

Key data

• Meeting date2026-03-31Goldman Sachs hosted YOFC's president and management team in Hong Kong.
• Relevant tickers6869.HK / 601869.SSThe report identifies YOFC as a not-covered company.
• Demand window2026-2028Management expects AI data center capex to drive strong optical fiber demand growth.
• Hollow-core fiber project target50 projects over the next five yearsCompared with the 13 projects already secured in 2025, management expects strong future application growth.
• Capacity expansion constraintBased on clients' long-term demand commitments and LTA negotiationsManagement said raw materials or equipment are not the bottleneck for further expansion.
• Read-through buy-rated namesEoptolink, Innolight, LandMark, TFC Optical, VPECThe disclosure page lists the corresponding Buy ratings and target prices: Eoptolink Rmb460.60, Innolight Rmb601.87, LandMark NT$1,730.00, TFC Optical Rmb333.33, and VPEC NT$263.50.
• Goldman Sachs global equity rating distributionBuy 50%, Hold 34%, Sell 16%From the disclosure chart, reflecting the global equity coverage rating distribution as of 2026-01-01.

Impact & implications

If the pace of AI data center buildout continues to rise, optical fiber demand, pricing, and margins may receive synchronized support; however, the company's capex is premised on long-term order commitments, implying a relatively cautious supply expansion that should help reduce the risk of disorderly overcapacity. For secondary markets, the report does not assign a rating to YOFC itself, but it delivers a positive read-through to the AI optical networking component supply chain.

Risks

• If AI data center capex falls short of management expectations, optical fiber demand growth in 2026-2028 could weaken.
• If client LTA negotiations progress more slowly than expected, the company's capex visibility and expansion pace may be affected.
• Improvement in optical fiber ASPs and margins depends on sustained tight demand; if supply and demand conditions ease, pricing momentum could fade.
• Although hollow-core fiber has application potential, the number and scale of commercialization projects still need to be continuously validated.
• The report does not cover YOFC and provides no target price or earnings forecast, so the investment conclusion is more of a qualitative signal and sector read-through.

What to watch

• Progress in LTA signings with key clients and the strength of long-term demand commitments.
• Execution of AI data center capex in 2026-2028.
• ASPs, margins, and delivery pace of overseas CSP optical fiber projects.
• YOFC's subsequent capex plans and capacity expansion timetable.
• The number of project wins for hollow-core fiber in DCI, supernode, and similar scenarios.
• Demand growth and specification upgrade cycles for AI optical networking component suppliers.