YOFC management is constructive on AI data center-driven optical fiber demand growth

Overview

This report is Goldman Sachs' meeting minutes after hosting YOFC's president and management team in Hong Kong. The core discussion covered optical fiber demand trends, pricing sustainability, capex plans, and the growth potential of hollow-core fiber applications. Management was broadly constructive on optical fiber demand growth from AI data centers and believes the demand upturn is already creating pricing momentum.

Core views

The report's key view is that rising AI data center capex will keep optical fiber demand growing at a relatively high rate in 2026-2028, supporting ASPs and margins for optical fiber products. The company will not expand purely to chase short-term tight supply; instead, expansion will be based on customers' long-term demand commitments and the outcome of LTA negotiations. Goldman Sachs also extrapolates YOFC management's views to the AI network and optical interconnect chain, arguing that in the inference era, GPU interconnects are more important for low-latency AI services, and optical network component suppliers should benefit from rapid demand growth and an accelerating specification-upgrade cycle.

Analysis framework

The report uses a combination of management interview minutes and supply-chain mapping, first summarizing YOFC's judgment on demand, pricing, capacity, and hollow-core fiber, and then cross-checking those views against Goldman Sachs' sector views on AI networks, optical interconnects, and related component suppliers.

Methodology notes

• Management researchCEO visit takeaways

  Meeting minutes

  Demand, pricing, capex, and new product application trends were distilled through discussions with company management, but YOFC itself is an uncovered name, so the report does not provide a rating or target price.

• Stock attribute frameworkGS Factor Profile

  Growth, financial returns, valuation multiples, and composite percentile comparison

  Goldman Sachs states that its factor framework compares stocks with the market and sector peers using indicators such as forward sales, EBITDA, EPS, ROE, ROCE, CROCI, and valuation multiples.

• M&A frameworkM&A Rank

  Potential acquisition probability tiering

  Goldman Sachs states that its global coverage uses M&A scores from 1 to 3, where 1 indicates a higher probability of being acquired, 2 indicates a medium probability, and 3 indicates a lower probability.

Asset mapping & comparison

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

• YOFC 6869.HK/601869.SS

  Core company in the meeting minutes, uncovered

  Strengths

  Management is constructive on AI data center-driven demand; optical fiber ASPs and margins may benefit; hollow-core fiber appears to have a leading yield profile and commercial application position.

  Weaknesses

  Capex depends on customers' long-term commitments, and near-term expansion visibility still awaits the outcome of LTA negotiations.

  Comparison

  The management target for the next five years is 50 hollow-core fiber projects, significantly above the 13 projects achieved in 2025.

  Risks

  LTA implementation falling short of expectations, slower-than-expected AI data center capex, and unsustainable pricing momentum.

• Optical network component suppliers

  Beneficiary direction within the supply chain

  Strengths

  In the AI inference era, stronger demand for GPU interconnects and low latency is driving optical interconnect demand and specification upgrades.

  Weaknesses

  The report does not go into each supplier's fundamentals individually; it mainly reflects an industry read-through.

  Comparison

  Goldman Sachs rates Innolight, TFC Optical, Eoptolink, LandMark, and VPEC as Buy.

  Risks

  Volatility in the AI capex cycle, changes in the pace of specification upgrades, and margin pressure from competition.

• Hollow-Core Fiber

  YOFC's future growth application

  Strengths

  Management believes it has a leading position in yield and commercial applications, with use cases including DCI and supernode.

  Weaknesses

  Commercial scale and project conversion still need to be proven.

  Comparison

  The target of 50 projects over the next five years is significantly higher than the 13 projects in 2025.

  Risks

  Adoption of the new technology slower than expected and a longer customer validation cycle.

Key data

• Management meeting date2026-03-31Goldman Sachs hosted YOFC's president and management team in Hong Kong.
• Demand outlook window2026-2028Management believes AI data center capex will drive relatively high growth in optical fiber demand.
• Hollow-core fiber project target50 projects over the next 5 yearsThis target is a clear increase from the 13 projects secured in 2025.
• Expansion bottleneckNo raw material or equipment bottleneckManagement said there are no bottlenecks in raw materials or equipment for further expansion, but capex still depends on customers' long-term demand commitments.
• Relevant Buy-rated namesEoptolink, Innolight, LandMark, TFC Optical, VPECThe disclosure page lists ratings and target prices: Eoptolink Buy Rmb460.60, Innolight Buy Rmb601.87, LandMark Buy NT$1,730.00, TFC Optical Buy Rmb333.33, VPEC Buy NT$263.50.

Impact & implications

If AI data center capex remains strong, demand for optical fiber and optical network components may continue to benefit, especially products related to GPU interconnects, low-latency AI inference services, and data center interconnects. For YOFC, LTA negotiations and customers' long-term commitments will shape the pace of capex; for the supply chain, specification upgrades and demand growth could be positive for optical network component suppliers.

Risks

• AI data center capex falls short of expectations, leading to slower optical fiber demand growth.
• Long-term customer agreement negotiations do not close as expected, affecting YOFC's expansion plans and demand visibility.
• Optical fiber pricing momentum or margin improvement may not be sustainable.
• Hollow-core fiber commercialization may progress more slowly than management expects.
• The report contains regulatory disclosures and general risk warnings; investment prices and values may fluctuate, and past performance does not guarantee future returns.

What to watch

• Progress in YOFC's LTA negotiations with major customers over the coming months.
• The AI data center capex trend in 2026-2028 and the pace of overseas CSP infrastructure buildout.
• Changes in optical fiber ASPs and margins.
• The degree of clarity around YOFC's capex plan.
• Project wins and commercialization progress for hollow-core fiber in DCI, supernode, and related scenarios.