US Ban on Chinese AI Hardware Could Disrupt Data Centers and Raise Costs for Amazon, Microsoft

Shares in Chinese AI darlings slide on US ban fears

Shares in two of China's biggest winners from the global AI boom sank on Wednesday following a report that the US could ban their equipment from its data centres. Zhongji Innolight and Eoptolink are Chinese manufacturers that build optical equipment needed for the fast transfer of information between chips in data centres. They have emerged as two of China's biggest winners from the global AI build-out. The mainland Chinese shares of Innolight and Eoptolink dropped by 8.6 per cent and 6.9 per cent respectively following a Reuters report that the US Federal Communications Commission was drafting a ban on imports of Chinese optical transceivers. The broader CSI 300 telecommunication services index fell as much as 9 per cent before paring gains to be about 4 per cent lower. The two companies are among China's biggest winners from the AI race as they supply both the US and Chinese data centre build-out -- although most of their profits have come from overseas demand. Since the start of 2023 Innolight and Eoptolink shares have soared by some 4,500 per cent, catapulting them into the ranks of China's most valuable companies. Earnings growth has been strong due to significant demand from US groups such as Amazon and Alphabet that buy their optical transceivers and other equipment needed for the data centres that power AI services. Net profit at Innolight rose to Rmb10.8bn ($1.6bn) last year, from Rmb2.2bn in 2023. Eoptolink profits climbed from Rmb688mn to Rmb9.5bn over the same period. Both companies make most of their money overseas. Last year more than 90 per cent of Innolight's Rmb38.2bn ($5.6bn) in revenue came from outside China, with the figure for Eoptolink standing at 96 per cent. The groups also count the likes of Huawei and Alibaba among their customers. This source of domestic demand is encouraged by Beijing, which is determined to develop its own AI technological capabilities independent of western systems. Kenny Ng, a strategist at Everbright Securities International, said the latest salvo from Washington will add to Beijing's resolve to support its local industrial innovation push. "Continuous and targeted US restrictions on AI computing power and underlying data centre hardware will further compel China to accelerate the push for self-reliance and autonomy in key technologies," he said. Such disruptions would "drive up costs for downstream application enterprises, thereby impacting the development pace of the AI industry", Ng added. Last week Innolight completed a Hong Kong listing. Its shares fell sharply during initial trading as it was swept up in a broader sell-off of the "picks and shovels" suppliers to the global AI build-out that has hit memory-chip makers particularly hard. The FCC did not immediately respond to a request for comment.

China AI hardware stocks slump after news US plans to ban imports of Chinese components

SHANGHAI, Aug 5 (Reuters) - China's artificial intelligence hardware stocks slumped on Wednesday after news that the Trump administration is drafting a ban on U.S. imports of new models of Chinese data centre components. The CSI300 Telecommunication Services Index (.CSI000916), opens new tab tumbled 6% in early trading. Export-dependent ⁠data centre component makers including Zhongji Innolight (300308.SZ), opens new tab, Eoptolink Technology (300502.SZ), opens new tab and Suzhou TFC Optical Communications (300349.SZ), opens new tab all opened sharply lower. The U.S. government is working on a measure to bar imports of new Chinese optical transceivers, which allow data to travel over ⁠fibre-optic cables at the speed of light within data centres, Reuters reported. The news threatens to hit already shaky confidence in China's ⁠AI hardware stocks after a savage sell-off. Zhongji Innolight shares fell roughly 8% in both ⁠Shanghai and Hong Kong in early trading. The Chinese optical parts maker ⁠generated 62% of its revenue from the U.S. in the first quarter. Reporting by Shanghai Newsroom; Editing by Tom Hogue Our Standards: The Thomson Reuters Trust Principles., opens new tab

FCC optics ban would hit US hyperscalers, Counterpoint says

The US Federal Communications Commission is drafting a ban on imports of new Chinese optical transceivers. These are the small modules that convert data into light pulses inside AI data centres, and Chinese firms make most of the world's supply. On the evidence so far, the first companies to feel the cost are American. China's two biggest optical module makers took a beating on Wednesday. Zhongji Innolight fell as much as 16%, according to the South China Morning Post. Bloomberg put the intraday drop at 14%. Eoptolink Technology slid with it. The trigger was a Reuters report that the FCC intends to halt imports of new models of optical transceiver. The stated aim is to stop Chinese firms stealing data or planting malware inside American facilities. It narrows a broader draft ban on Chinese data centre devices onto one specific component. That component is not exotic. Optical transceivers sit at either end of a fibre link and translate electrical signals into light and back again. Every rack in a modern AI cluster depends on them. A rule aimed at China that lands on American buyers Research firm Counterpoint published a note on Wednesday warning that the ban would damage the companies it is meant to protect. Hyperscalers such as Amazon and Microsoft would face higher costs if Chinese optics suppliers were cut off, analyst Neil Shah wrote. Their expensive AI accelerators would also run at lower utilisation. "The belief that the optical transceiver market can be neatly divided geographically misinterprets how the hardware ecosystem operates," Shah said in the note, reported by Bloomberg. "The global AI ecosystem remains heavily reliant on Chinese optical module vendors for scale execution." The dependency is not marginal. Counterpoint puts the Chinese share of global optical transceiver supply at nearly two thirds. Data from LightCounting, cited by Caixin, has Chinese companies holding seven of the top ten positions in optical modules worldwide. Narrow it to the fastest parts and the concentration gets worse. Innolight and Eoptolink together account for more than 60% of the global market in 800G and above, according to the same LightCounting figures. Those are the modules AI clusters actually buy. The Western suppliers inside the Chinese modules Shah made a second point that complicates the security case. The transceivers Chinese firms build are not purely Chinese. They integrate chips from Broadcom and Marvell, plus lasers and optical chips from Lumentum and Japan's Mitsubishi Electric. Cut off the finished modules and those suppliers lose a customer. Markets did not read it that way on the day. Applied Optoelectronics, Coherent, and Nokia all rallied, and Caixin reported gains of 8% to 10% for Coherent, Lumentum, and Marvell. So Lumentum and Marvell rose on a rule that removes one of their larger buyers. Whether that holds depends on how fast Western manufacturers can take the volume. Shah's answer was blunt: they cannot, not within the next year or two. "While policy initiatives seek to insulate critical AI supply chains, sudden regulatory shifts risk creating hardware bottlenecks that could slow down deployment schedules for the world's largest cloud operators," he said. How exposed the Chinese firms actually are The pain is genuinely mutual. Innolight booked 61.7% of its first-quarter 2026 revenue in the US, roughly 12bn yuan, per Caixin. Reuters reported the figure as 62%. Eoptolink earns 96% of its revenue from exports. Both firms listed in Hong Kong only recently. Innolight raised money in an $8bn Hong Kong offering. Eoptolink followed with a $5bn listing, built on the same AI optical demand now under threat. There is a counter-reading. A separate Bloomberg analysis argued that the ban would strain a fragile trade truce, but is unlikely to dent China's export engine overall. Optics is one product line in a very large machine. Beijing answered the same day China's Ministry of Commerce announced a set of countermeasures on Wednesday. Exports of drones, their key components, and related technologies to the US now face case-by-case scrutiny, effective immediately, the Associated Press reported. The ministry added six US entities to a countermeasures list. They include Applied DNA Sciences and the non-governmental group Human Rights in China. It also barred a firm called Compliance Testing LLC from doing business in China, specifically for working with the FCC. The ministry also opened a national security review of imported printing software and office equipment. Separately, US companies can no longer run follow-up factory inspections for Chinese CCC safety certification, which pushes that work to auditors outside the US. Beijing framed the moves as a response to recent American restrictions. Those include an FCC drone import ban and the addition of 43 Chinese companies to a forced-labour entity list. Last week the FCC also put foreign-made humanoid robots and power inverters on its covered list, which had already drawn a retaliatory response involving rare earths. All of this lands ahead of an expected visit by Xi Jinping to the US in September. The transceiver rule is still a draft, and the FCC has softened one before. Its December ban on Chinese drone imports was later revised to let some models through. Nobody has yet explained who absorbs the gap in the meantime. On a buildout this size, a few months of delayed capacity costs far more than the components ever did.

EXCLUSIVE: Trump administration drafting ban on Chinese data center devices, sources say

WASHINGTON, Aug 4 (Reuters) - The Trump administration is drafting a ban on U.S. imports of new models of Chinese data center components, four people familiar with the matter told Reuters, as it seeks to protect the infrastructure that undergirds the AI boom. The Federal Communications Commission, which oversees the U.S. telecom industry, is working on the measure to bar imports of new Chinese optical transceivers, which allow data to travel over fiber-optic cables at the speed of light within data centers. Officials hope to publish it this year, when it would take effect. The move, not previously reported, aims to prevent Chinese firms from stealing data, installing malware or disrupting service at U.S. data centers, which house the chips to train and run AI models. The FCC could still modify or shelve the restriction, the sources stressed, speaking on condition of anonymity to discuss sensitive matters. But it is the latest example of the Trump administration trying to limit Chinese technological incursions into cutting-edge U.S. industries before they become embedded in the ⁠supply chain. "Transceivers definitely pose a risk," said Divyansh Kaushik, an AI policy expert at Washington, D.C., advisory firm Beacon Global Strategies. "As the data center buildout scales up, you want to make sure the data center supply chain is secure from the get-go," he added. CHINA WILL RESPOND IF NECESSARY: EMBASSY The White House and the FCC did not respond to requests for comment. The Chinese embassy in Washington said Beijing urges the United States to "heed the objective and rational voices of the business communities in both countries" and "stop smearing Chinese companies and threatening them with sanctions." "China will take all necessary measures in response to any action that causes material harm to its interests," it added. China hawks in the administration are keen to avoid another situation like Huawei, where telecom equipment made by the heavily sanctioned Chinese firm was so deeply embedded in U.S. infrastructure that efforts to remove it were slow, expensive and incomplete. The FCC has historically been independent, but in June the U.S. Supreme Court backed President Donald Trump's firing of a Democratic Federal Trade Commission member, expanding his powers over the government, including certain regulatory agencies. A U.S. ban on new models of Chinese data center ⁠devices would likely hit China's Zhongji Innolight (300308.SZ), opens new tab, one of the biggest global sellers of transceivers, which was added to the Pentagon's list of alleged Chinese military-backed companies in June. The list can be a harbinger of tougher action. Innolight did not respond to requests for comment. A ban could also raise costs for American cloud firms such as Amazon Web Services (AMZN.O), opens new tab, as it may force them to transition to other producers such as U.S.-based Coherent (COHR.N), opens new tab and Lumentum (LITE.O), opens new tab, which stand to benefit from the measure. Innolight has a leading 27% share of the global data center transceiver market, according to Counterpoint Research. Coherent and Lumentum sell competitive technology but ⁠lack the scale to replace Chinese vendors, according to a report by the Foundation for American Innovation. Innolight generates 90% of its revenue outside China, the report added. AWS, Coherent and Lumentum did not respond to requests for comment. The FCC has imposed similar curbs on Chinese drones, routers, robots and inverters, as first reported by Reuters. In line with those restrictions, the agency would ban all imports of new transceiver models and then exempt many ⁠non-Chinese suppliers from the restrictions, three of the sources said. Trump drew attention during his first term to alleged intellectual property theft by Chinese firms and state-sponsored spying by Huawei, which the company denies. But Trump has taken a less aggressive approach during his second term after Beijing's use of export controls on rare earth minerals last year. Reuters reported in February that the Commerce Department, which ⁠has tools to police the tech supply chain for perceived threats from China, shelved a group of import restrictions on China -- including one targeting Chinese data center equipment -- following a trade war détente last October. But the FCC has stepped in, announcing the drone and router bans in December and March, respectively, via its so-called Covered List, created by Congress to bar future equipment sales by foreign companies whose products pose national security risks. Moves against Chinese inverters and robots followed last week. Reporting by Alexandra Alper Editing by Rod Nickel Our Standards: The Thomson Reuters Trust Principles., opens new tab

US is drafting a ban on Chinese devices in data centres

The move would extend a fast-widening campaign to keep Chinese hardware out of the infrastructure behind the American AI buildout. The Trump administration wants Chinese hardware out of American data centres. Officials are drafting a ban on Chinese-made devices used in data centres, according to Reuters, the latest move to wall off the infrastructure behind the US AI buildout from Chinese technology. The draft extends a campaign that has been widening fast. It follows a ban, unveiled days earlier, on new Chinese humanoid robots and power inverters, both cast as risks to critical infrastructure. That earlier move set the template. US regulators added foreign robots and inverters to a restricted list over fears that Chinese-controlled devices could become supply-chain vulnerabilities or remote-access points. Data centres are the natural next target. They are the physical core of the AI economy, packed with servers, networking gear, and power equipment, and Washington increasingly treats any Chinese component inside them as a liability. The logic is control over the stack. If AI is a strategic asset, the argument runs, the machines that train and serve it should not depend on parts made by a rival that could, in theory, disrupt or surveil them. Enforcement is the hard part. Bans of this kind are routinely undercut by resellers, relabelled parts, and subsidiaries, and closing those loopholes is as much of the drafting work as naming the devices. The gear most likely in the frame is the connective tissue of a data centre: networking switches, servers, storage, and the management chips inside them. Any of these could, in theory, carry a hidden path back to a foreign vendor. Untangling it will not be instant. American operators still lean on Chinese components in places, and some networking and power equipment has few non-Chinese equivalents at the price and volume the buildout demands. Washington has also been nudging allies to follow. Britain and others have weighed emulating its curbs, which would widen the market that Chinese vendors lose at a stroke. Beijing has not taken the pressure quietly. China has threatened retaliation over the US robot ban, including leverage over the rare-earth minerals that Western manufacturers cannot easily source elsewhere. The two sides are now trading restrictions in a familiar rhythm. Each ban invites a counter-ban, and a technology supply chain that took decades to knit together is being unpicked category by category. The through-line is the AI race. The administration casts hardware decoupling as protecting the American AI buildout, the same rationale it uses to justify export controls on chips flowing the other way. Hardware is only half of it. The administration has also weighed restrictions on Chinese AI models themselves, a move startups urged it not to make, warning that cutting off cheap open-weight models would hurt American developers more than China. Bans carry a bill. Ripping Chinese devices out of data centres, or barring cheaper Chinese gear, raises costs for the operators racing to build capacity, a tension the industry has flagged even as it accepts the security case. China, for its part, is building its own way around the same problem. A Chinese lab recently stood up a large data centre with no Nvidia inside, a sign of how completely both countries now want domestic control of the AI stack. There is a cost to moving this fast, too. Rules drafted in a hurry can sweep in gear with no viable non-Chinese substitute, leaving operators to choose between breaking the rules and stalling their builds. The rules would ripple well beyond the US. Vendors barred from American data centres lose one of the world's largest markets, and any move by allies to follow multiplies the effect far past a single country. The draft is not final, and the exact list of banned devices is still being written. But the direction is unmistakable: on both sides of the Pacific, the machinery of artificial intelligence is becoming something each superpower insists on building for itself.

China Supplies Nearly Two-Thirds of a Crucial AI Component. New Proposed U.S. Restrictions Could Slow Data Centers

The Trump administration is considering restrictions on imports of new Chinese optical-transceiver models -- a move that could leave American AI companies searching for replacements that experts say could take years to produce. The Federal Communications Commission is drafting the measure and hopes to introduce it this year, Reuters reported, citing four people familiar with the matter. The proposal could change or be abandoned. It would target new models rather than force companies to remove equipment already in use. The biggest target would likely be Zhongji Innolight, which accounted for approximately 27 percent of global data center transceiver revenue in 2025, according to Counterpoint Research. The United States generated 61.7 percent of the company's first-quarter revenue. The threat comes days after Zhongji raised $6.8 billion in Hong Kong's largest share sale of the year. InnoLight founder Liu Sheng -- now Zhongji's chairman and president -- said at the July 30 listing ceremony that AI was reshaping the global industrial landscape. The company plans to spend the proceeds on research, factories, supply chain improvements, and acquisitions.

Exclusive-Trump Administration Drafting Ban on Chinese Data Center Devices, Sources Say

WASHINGTON, Aug 4 (Reuters) - The Trump administration is drafting a ban on U.S. imports of new models ⁠of ⁠Chinese data center components, four people familiar with the ⁠matter told Reuters, as it seeks to protect the infrastructure that undergirds the AI boom. The Federal Communications Commission, which oversees the U.S. telecom industry, is working on the measure to bar imports of new Chinese optical transceivers, which allow data to travel over fiber-optic cables at the speed of light within data centers. Officials hope to publish it this year, when it would take effect. The move, not previously reported, aims to prevent Chinese firms from stealing data, installing malware or disrupting service at U.S. data centers, which house the chips to train and run AI ⁠models. The FCC could still ⁠modify or shelve the restriction, the sources stressed, speaking on condition of anonymity to discuss sensitive matters. But it is the latest example of the Trump administration trying to limit Chinese technological incursions into cutting-edge U.S. industries before they become embedded in the supply chain. "Transceivers definitely pose a risk," said Divyansh Kaushik, an AI policy expert at Washington, D.C., advisory firm Beacon Global Strategies. "As the data center buildout scales up, you want to make sure the data center supply chain is secure from the get-go," he added. CHINA WILL RESPOND IF NECESSARY: EMBASSY The White House and the FCC did not respond to requests for comment. The Chinese embassy in Washington said Beijing urges the United States to "heed ⁠the ⁠objective and rational voices of the business ⁠communities in both countries" and "stop smearing Chinese companies and threatening them with sanctions." "China will take all necessary measures in response to any action that causes material harm to its interests," it added. China hawks in the administration are keen to avoid another ⁠situation like Huawei, where telecom equipment made by the heavily sanctioned Chinese firm was so deeply embedded in U.S. infrastructure that efforts to remove it were slow, expensive and incomplete. The FCC has historically been independent, but in June the U.S. Supreme Court backed President Donald Trump's firing of a Democratic Federal Trade Commission member, expanding his powers over the government, including certain regulatory agencies. A U.S. ban on new models of Chinese data center devices would likely hit China's Zhongji Innolight, one of the biggest global sellers of transceivers, which was added to the Pentagon's list of alleged Chinese military-backed ⁠companies in June. The list can be a harbinger of tougher action. Innolight did not respond to requests for comment. A ban could ⁠also raise costs for American cloud firms such as Amazon Web Services, as it may force them to transition to other producers such as U.S.-based Coherent and Lumentum, which stand to benefit from the measure. Innolight has a leading 27% share of the global data center transceiver market, according to Counterpoint Research. Coherent and Lumentum sell competitive technology but lack the scale to replace Chinese vendors, according to a report by the Foundation for American Innovation. Innolight generates 90% of its revenue outside China, the report added. AWS, Coherent and Lumentum did not respond to requests for comment. The FCC has imposed similar curbs on Chinese drones, routers, robots and inverters, as first reported by Reuters. In line with those restrictions, the agency would ban all imports of new transceiver models and then exempt many non-Chinese suppliers from the restrictions, three of the sources said. Trump drew attention during his first term to alleged intellectual property theft by Chinese firms and state-sponsored spying by Huawei, which the company denies. But ⁠Trump has taken a less aggressive approach during his second term after Beijing's use of export controls on rare earth minerals last year. Reuters reported in February that the Commerce Department, which has tools to police the tech supply chain for perceived threats from China, shelved a group of import restrictions on China -- including one targeting Chinese data center equipment -- following a trade war détente last October. But the FCC has stepped in, announcing the drone and router bans in December and March, respectively, via its so-called Covered List, created by Congress to bar future equipment sales by foreign companies whose products pose national security risks. Moves against Chinese inverters and robots followed last week. (Reporting by Alexandra AlperEditing by Rod Nickel)

Donald Trump administration weighs ban on Chinese AI data centre gear imports

The Trump administration is drafting a ban on new Chinese data center component imports. This measure aims to protect critical infrastructure underpinning the AI boom. The Federal Communications Commission is working on this restriction for optical transceivers. Officials hope to publish the ban this year, taking effect soon after. China stated it will take necessary measures if its interests are harmed. Washington: The Trump administration is drafting a ban on U.S. imports of new models of Chinese data center components, four people familiar with the matter told Reuters, as it seeks to protect the infrastructure that undergirds the AI boom. The Federal Communications Commission, which oversees the U.S. telecom industry, is working on the measure to bar imports of new Chinese optical transceivers, which allow data to travel over fiber-optic cables at the speed of light within data centers. Officials hope to publish it this year, when it would take effect. The move, not previously reported, aims to prevent Chinese firms from stealing data, installing malware or disrupting service at U.S. data centers, which house the chips to train and run AI models. The FCC could still modify ⁠or shelve the ⁠restriction, the sources stressed, speaking on condition of anonymity to discuss sensitive matters. But it is the latest example of the Trump administration trying to limit Chinese technological incursions into cutting-edge U.S. industries before they become embedded in the supply chain. "Transceivers definitely pose a risk," said Divyansh Kaushik, an AI policy expert at Washington, D.C., advisory firm Beacon Global Strategies. "As the data center buildout scales up, you want to make sure the data center supply chain is secure from the get-go," he added. Shares of U.S.-based transceiver makers seen as beneficiaries of the measure rose following the news. Lumentum, Coherent, and Applied Optoelectronics, jumped 7%, 11%, and 18%, respectively. CHINA WILL RESPOND IF NECESSARY: EMBASSYThe White House and the FCC did not respond to requests for comment. The Chinese embassy in Washington said Beijing urges the United States to "heed the objective and ⁠rational voices of the business communities in both countries" and "stop smearing Chinese companies and threatening them with sanctions." "China will take all necessary measures in response to any action that causes material harm to its interests," it added. A U.S. ban on new models of Chinese data center devices would likely hit ⁠China's Zhongji Innolight, one of the biggest global sellers of transceivers, which was added to the Pentagon's list of alleged Chinese military-backed companies in June. The list can be a harbinger of tougher action. Innolight did not respond to requests for comment. A ban could also raise costs for American cloud firms such as Amazon Web Services, as it may force them to transition to other producers such as U.S.-based Coherent and Lumentum. China hawks in the administration are keen to avoid another situation like Huawei, where telecom equipment made by the heavily sanctioned Chinese firm was so deeply embedded in U.S. infrastructure that efforts to remove it were slow, expensive and incomplete. The FCC has historically been independent, but in June the U.S. Supreme Court backed President Donald Trump's firing of a Democratic Federal Trade Commission member, expanding his powers over the government, including certain regulatory agencies. Innolight has a leading 27% share of the global data center transceiver market, according to Counterpoint Research. Coherent and Lumentum sell competitive technology but lack the scale to replace Chinese vendors, according to a report by the Foundation for American Innovation. Innolight generates 90% of its revenue outside China, the report added. AWS, Coherent and Lumentum did not respond to requests for ⁠comment. The FCC has imposed similar curbs on Chinese drones, routers, robots and inverters, as first reported by Reuters. In line with those restrictions, the agency would ban all imports of new transceiver models and then exempt many non-Chinese suppliers from the restrictions, three of the sources said. Trump drew attention during his first term to alleged intellectual property theft by Chinese firms and state-sponsored spying by Huawei, which the company denies. But Trump has taken a less aggressive approach during his second term after Beijing's use of export controls on rare-earth minerals last year. Reuters reported in February that the Commerce Department, which has tools to police the tech supply chain for perceived threats from China, shelved a group of import restrictions on China - including one targeting Chinese data center equipment - following a trade war detente last October. But the FCC has stepped in, announcing the drone and router bans in December and March, respectively, via its Covered List, created by Congress to bar future equipment sales by foreign companies whose products pose national security risks. Moves against Chinese inverters and robots followed last week.

Broadcom, Nvidia Face Risk From China AI Component Ban - Broadcom (NASDAQ:AVGO), Advanced Micro Devices (

Broadcom, Marvell And Nvidia Could Feel the Impact of US Ban on Chinese AI Components The Donald Trump administration's push to ban China's role in the U.S.-AI supply chain may have an unintended consequence: making it more difficult and expensive to build the very AI infrastructure U.S. companies are racing to deploy. Why Optical Transceivers Matter to AI Optical transceivers rarely grab headlines, but they are a critical piece of modern AI infrastructure. These devices convert electrical signals into optical signals, allowing the enormous volumes of data generated by AI chips to move rapidly between servers inside data centers. As AI clusters expand, those networking components become just as important as the GPUs performing the computations. Without enough optical transceivers, even the most advanced AI chips cannot communicate efficiently across thousands of interconnected servers. According to BNP Paribas analyst Karl Ackerman, Chinese manufacturers are expected to control more than 60% of the global data center optical transceiver market in 2026, with Innolight and Eoptolink among the largest suppliers serving the U.S. market. The Ban Could Reach Beyond Chinese Companies At first glance, restricting Chinese suppliers appears to create an opportunity for non-Chinese competitors. But Ackerman argues the supply chain is far more interconnected than that simple narrative suggests. Optical transceivers rely on digital signal processors, or DSPs -- specialized chips that process the high-speed data traveling through fiber-optic networks. BNP estimates those processors account for roughly 40% of a transceiver's bill of materials. Nvidia and AMD Could Face Another AI Constraint The implications extend beyond component suppliers. Replacing that manufacturing capacity would not be straightforward. BNP argues U.S. suppliers are unlikely to immediately produce enough 800G and emerging 1.6-terabit transceivers to meet demand as hyperscalers ramp deployments of next-generation AI infrastructure. Instead of strengthening the domestic AI ecosystem, the bank believes an outright ban could tighten supplies of critical networking equipment, raise infrastructure costs and add further inflationary pressure to already record AI capital spending. For investors, the report highlights an increasingly important reality of the AI buildout: the next supply-chain bottleneck may not come from GPUs, but from the networking hardware that connects them. Photo Courtesy: Pixels Hunter on Shutterstock.com Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.

Trump administration drafting ban on Chinese data center devices, sources say

WASHINGTON - The Trump administration is drafting a ban on U.S. imports of new models of Chinese data center components, four people familiar with the matter said, as it seeks to protect the infrastructure that undergirds the AI boom. The Federal Communications Commission, which oversees the U.S. telecom industry, is working on the measure to bar imports of new Chinese optical transceivers, which allow data to travel over fiber-optic cables at the speed of light within data centers. Officials hope to publish it this year, when it would take effect. The move, not previously reported, aims to prevent Chinese firms from stealing data, installing malware or disrupting service at U.S. data centers, which house the chips to train and run AI models.

Trump administration drafting ban on Chinese data center devices, sources say

The Trump administration is drafting a ban on new Chinese data center component imports. This measure aims to protect critical infrastructure underpinning the AI boom. Officials hope to publish the restriction this year, taking effect soon after. China has stated it will respond to any actions harming its interests. This move follows similar curbs on Chinese drones and routers. The Trump administration is drafting a ban on U.S. imports of new models of Chinese data center components, four people familiar with the matter told Reuters, as it seeks to protect the infrastructure that undergirds the AI boom. The Federal Communications Commission, which oversees the U.S. telecom industry, is working on the measure to bar imports of new Chinese optical transceivers, which allow data to travel over fiber-optic cables at the speed of light within data centers. Officials hope to publish it this year, when it would take effect. The move, not previously reported, aims to prevent Chinese firms from stealing data, installing malware or disrupting service at U.S. data centers, which house the chips to train and run AI models. The FCC could still ⁠modify or ⁠shelve the restriction, the sources stressed, speaking on condition of anonymity to discuss sensitive matters. But it is the latest example of the Trump administration trying to limit Chinese technological incursions into cutting-edge U.S. industries before they become embedded in the supply chain. "Transceivers definitely pose a risk," said Divyansh Kaushik, an AI policy expert at Washington, D.C., advisory firm Beacon Global Strategies. "As the data center buildout scales up, you want to make sure the data center supply chain is secure from the get-go," he added. CHINA WILL RESPOND IF NECESSARY: EMBASSY The White House and the FCC did not respond to requests for comment. The Chinese embassy in Washington said Beijing urges the United States to "heed the objective and rational voices of the business communities in both countries" and "stop smearing Chinese companies and threatening them with sanctions." "China will take ⁠all necessary measures in response to any action that causes material harm to its interests," it added. China hawks in the administration are keen to avoid another situation like Huawei, where telecom equipment made by the heavily sanctioned Chinese firm was so deeply embedded in U.S. infrastructure that efforts to remove ⁠it were slow, expensive and incomplete. The FCC has historically been independent, but in June the U.S. Supreme Court backed President Donald Trump's firing of a Democratic Federal Trade Commission member, expanding his powers over the government, including certain regulatory agencies. A U.S. ban on new models of Chinese data center devices would likely hit China's Zhongji Innolight, one of the biggest global sellers of transceivers, which was added to the Pentagon's list of alleged Chinese military-backed companies in June. The list can be a harbinger of tougher action. Innolight did not respond to requests for comment. A ban could also raise costs for American cloud firms such as Amazon Web Services, as it may force them to transition to other producers such as U.S.-based Coherent and Lumentum, which stand to benefit from the measure. Innolight has a leading 27% share of the global data center transceiver market, according to Counterpoint Research. Coherent and Lumentum sell competitive technology but lack the scale to replace Chinese vendors, according to a report by the Foundation for American Innovation. Innolight generates 90% of its revenue outside China, the report added. AWS, Coherent and Lumentum did not respond to requests for comment. The FCC has imposed similar curbs on ⁠Chinese drones, routers, robots and inverters, as first reported by Reuters. In line with those restrictions, the agency would ban all imports of new transceiver models and then exempt many non-Chinese suppliers from the restrictions, three of the sources said. Trump drew attention during his first term to alleged intellectual property theft by Chinese firms and state-sponsored spying by Huawei, which the company denies. But Trump has taken a less aggressive approach during his second term after Beijing's use of export controls on rare earth minerals last year. Reuters reported in February that the Commerce Department, which has tools to police the tech supply chain for perceived threats from China, shelved a group of import restrictions on China - including one targeting Chinese data center equipment - following a trade war detente last October. But the FCC has stepped in, announcing the drone and router bans in December and March, respectively, via its so-called Covered List, created by Congress to bar future equipment sales by foreign companies whose products pose national security risks. Moves against Chinese inverters and robots followed last week.

China AI optical stocks fall on report U.S. weighs ban on data center components By Investing.com

Investing.com-- Chinese artificial intelligence hardware stocks fell sharply on Wednesday after a Reuters report that the Trump administration is drafting a ban on U.S. imports of new Chinese data center components, raising concerns over fresh trade restrictions. Shares of optical components maker Zhongji Innolight (SZ:300308) (HK:3308) dropped about 10% in both Shenzhen and Hong Kong trading. Shenzhen-listed Eoptolink Technology (SZ:300502) dropped more than 7%, while Suzhou TFC Optical Communication Co (SZ:300394) fell 3.5%. Get real-time updates on market-moving news with InvestingPro -- at 55% off now Investors assessed the potential impact on exporters heavily exposed to the U.S. market. Reuters reported on Tuesday that the Federal Communications Commission is working on rules to bar imports of new Chinese optical transceivers, which move data through fiber-optic cables inside data centers. Officials aim to publish the measure this year, although it could still be modified or shelved, the report said. The proposed restrictions are intended to reduce security risks tied to AI infrastructure, including potential data theft, malware and service disruptions, Reuters reported.

Chinese Optical Module Stocks Fall After Report of Possible U.S. Import Ban

Shares of Chinese optical transceiver makers fell following a report of a potential U.S. ban on imports of new models of Chinese optical components, the latest hit to sentiment on Chinese artificial-intelligence hardware stocks. Zhongji Innolight dropped 7.1% in Hong Kong and 7.0% in Shenzhen in afternoon trading Wednesday. Eoptolink Technology declined 5.0%. The Federal Communications Commission, which oversees the U.S. telecom industry, is drafting a proposal to bar imports of new Chinese optical transceivers, Reuters reported Tuesday, citing unnamed sources. The report weighed on a segment of the AI supply chain that has already seen market sentiment rattled by AI spending concerns. However, some analysts said it is unlikely the U.S. will impose a clear-cut ban, as Chinese vendors dominate the optical transceiver market. Optical transceivers play an increasingly important role in AI data centers, as they serve as the interface between electrical signals and optical signals, enabling data to travel over fiber-optic cables between servers with minimal latency amid surging computing demand. Counterpoint Research estimates that Chinese vendors account for nearly two-thirds of global unit supply, with Innolight controlling 27% of the data-center transceiver market. The U.S.'s Coherent holds the second-largest share, at 17%, followed by Eoptolink. Innolight and Eoptolink didn't immediately respond to requests for comments. Any blanket ban would hit both Chinese suppliers and the U.S. cloud service providers. Western competitors like Coherent and Lumentum are unable to absorb Innolight's and Eoptolink's volume within two years if the ban is imposed, Counterpoint's Neil Shah said. Chinese players also hold key advantages in cost and advanced product development while the current AI optics supply chain remains tight, Citi analysts wrote in a note. Innolight generated more than 60% of its revenue in the first quarter of 2026 from the U.S. and counts Google and Nvidia as clients. Meanwhile, cloud service providers typically go through a rigorous multistage qualification process for high-end optical modules, making any switch in suppliers a lengthy and costly process. Vendors such as Innolight and Eoptolink have already aggressively expanded manufacturing footprints outside China in recent years to mitigate potential trade restrictions. It remains unclear how the FCC will define Chinese-manufactured optical components--or whether the ban will be imposed at all. "We believe certain exemptions will apply given the market situation, and that overseas capacity expansion remains a key strategy for Chinese suppliers," Citi analysts said.

Washington Redraws the Optical Components Market

According to multiple consistent reports cited by Reuters, the Trump administration is preparing a ban on new Chinese optical transceivers used in US data centers. The stated goal is security: preventing critical components from being used as vectors for espionage, sabotage, or cyberattacks inside the infrastructure that hosts artificial intelligence models. Based on available information, the FCC hopes to implement this measure before year-end, even though the plan could still change. Transceivers are the data centers' "highways". They handle data exchanges between servers and GPU clusters at ever higher speeds. As AI infrastructure scales up, their importance is becoming comparable to that of the processors themselves. Without them, it is impossible to efficiently connect tens of thousands of GPUs. For a long time, Chinese manufacturers established themselves as essential suppliers. Zhongji Innolight now holds about 27% of the global market for data center transceivers and generates most of its business outside China. That dominance rests on years of industrial investment and strong competitiveness in the most advanced products. If Washington gradually closes the US market to these players, hyperscalers such as Amazon Web Services, Microsoft, Google, Meta, or Oracle will have to find other suppliers. This simple regulatory shift could reshuffle several billion dollars in revenue across the entire value chain. American Manufacturers on the Front Line The main potential winners are US manufacturers of optical components. Lumentum, Coherent and Applied Optoelectronics are the most obvious beneficiaries. These companies produce transceivers directly or photonic components that are essential to 400G, 800G, and soon 1.6T architectures. If Chinese suppliers gradually disappear from US tenders, part of that demand should naturally shift to them. Beyond a simple transfer of volume, this change would give them more negotiating leverage, fuller order books, and better visibility for industrial investment. Ciena could also benefit from this shift. Even though its business is more focused on optical networking equipment, the group is directly exposed to investment in data center communications infrastructure, which should continue to accelerate as AI ramps up. The positive effects could also ripple up the entire industrial chain. Corning, the global leader in optical fiber, would benefit from sustained demand for network infrastructure. AMS-Osram, a specialist in optoelectronic components, would benefit from faster investment in advanced photonics. Finally, AXT, which supplies indium phosphide (InP) and gallium arsenide (GaAs) substrates, could see demand for its materials rise if Western manufacturers expand production capacity. A Chinese Dominance the Market Underestimates The scale of this announcement is probably still underestimated by investors. Chinese manufacturers are not secondary players. They now dominate a large portion of the global optical components industry. In 800G optical modules, which equip the latest-generation AI infrastructure built around the NVIDIA ecosystem, Innolight and Eoptolink alone would account for nearly 60% of volumes. More broadly, seven of the world's top 10 optical module manufacturers (ODMs) are Chinese. The three leaders, Innolight, Eoptolink and HGGenuine, together control about 55% of global market share in 100G optics and above. In other words, if Washington gradually closes its market to these companies, this is not a minor regulatory adjustment. It is a massive redistribution of market share that could play out in favor of Western manufacturers. Hyperscalers Will Probably Have to Foot the Bill This reorganization will come at a cost, however. Large cloud operators (Amazon Web Services, Microsoft Azure, Google Cloud, Meta or even Oracle) have so far benefited from intense competition between US and Chinese suppliers. That competition helped keep prices for optical modules under pressure. By sharply reducing the number of available suppliers, Washington could paradoxically raise the cost of AI infrastructure. Western manufacturers currently have more limited production capacity than their Chinese rivals. That scarcity will give them more pricing power. In other words, hyperscalers may have to absorb several billion dollars of additional Capex over the next few years. This increase is unlikely to derail their AI investment plans, but it will mechanically improve the profitability of Western suppliers. Markets already seem to be starting to price in that scenario. After the first reports were published, shares of Applied Optoelectronics, Coherent, Lumentum and Corning surged, illustrating investors' expectation of a durable redistribution of market share. This issue goes beyond the transceiver market alone. It shows that Washington is no longer just trying to limit China's access to the most advanced technologies. The strategy now is to gradually reduce China's presence across the entire supply chain for AI infrastructure. Earlier restrictions targeting drones, routers, robots, or inverters follow the same logic. Transceivers may simply be the next step. That's also why many investors are now watching the memory sector more closely. Discussions around CXMT and YMTC show that US authorities are already examining dependence on Chinese suppliers in other strategic components. US senators are applying growing pressure to prevent US companies from sourcing from these groups, while several observers believe transceivers may be only the first domino in a broader strategy. If this logic continues, Western memory makers could see the same kind of demand reallocation now being contemplated for optics. So the real story may not be transceivers. It is an AI value chain being reshaped by geopolitics. Optical components are likely the first major test of this new logic. If this strategy is maintained, it could durably redraw the global map of suppliers for artificial intelligence infrastructure.