Forget Chips – These 3 Chinese Firms Are the Real AI Market Winners
When investors talk about artificial intelligence, they usually focus on chips or software. Yet in China, the biggest winners of 2025 have been companies producing a far less glamorous component: optical transceivers.
Zhongji Innolight, Eoptolink Technology, and Suzhou TFC Optical Communication have stunned the market by turning into the top-performing stocks on the CSI 300. Their products sit deep inside data centers, ferrying light signals between GPUs and allowing AI clusters to process information at enormous scale. As demand for computing power has exploded, so too have their order books.
The numbers are eye-catching. Eoptolink’s shares have more than quadrupled this year, Innolight has surged over 230%, and Suzhou TFC is up more than 160%. Collectively, the three firms have left behind flashy peers like gold retailers and chip designers to dominate China’s equity leaderboard.
Global AI developments have only added fuel. Nvidia’s multi-billion-dollar commitments to Intel and OpenAI, coupled with Alibaba’s $50 billion bet on homegrown AI, reignited enthusiasm for the sector. Chinese tech indices have since outpaced both the Nasdaq and Hong Kong’s Hang Seng Tech gauge.
Their reliance on international buyers underscores both strength and risk. Alphabet alone accounts for more than a third of Innolight’s revenue, while Suzhou TFC supplies directly to Nvidia. To shield themselves from U.S. tariffs, the firms have quietly built new capacity in Thailand, a hedge against geopolitical shocks.
Analysts note that profits are rising just as quickly as share prices. Sector earnings grew 125% year-on-year in the second quarter, according to CSC Financial. But valuation concerns are mounting: all three companies now trade above their five-year averages. Invesco portfolio manager Chris Liu warns the momentum could stall in the short term, even if long-term demand remains strong.
For now, liquidity is on their side. Domestic public funds have piled into optical transceiver stocks, and with household savings high and margin financing at records, the rally may keep rolling even as overseas investors wait for cheaper entry points.
In a year dominated by AI hype, China’s hottest stocks aren’t writing code or designing chips. They’re building the silent hardware that keeps the AI machine humming — and, for the moment, they’re the undisputed stars of the market.
Source: Bloomberg
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