The landscape of technology and finance has seen some remarkable shifts in recent months, particularly within sectors closely tied to artificial intelligence (AI) and data processingCompanies at the forefront of this growth, particularly in the optical module industry, are announcing significant revenue increases, which can be attributed to burgeoning demand for computational power and data center expansion.

On the evening of January 20, Xinyi Technology, a leading optical module manufacturer, released a stunning performance forecast for 2024. The company is expecting its net profit to reach between 2.8 billion and 3.05 billion yuan, representing a staggering year-on-year growth of 307% to 343%. This forecast notably exceeds the average prediction from over a dozen brokerage firms, which had estimated the net profits to around 2.3 billion yuanXinyi Technology attributed this impressive growth to sustained investments in computing power and a swift uptick in demand for high-speed products.

In a world increasingly driven by AI advancements, the demands for computational resources have surged dramatically, leading to accelerated data center developmentSeveral other companies within the technology sector are witnessing similar growth patternsFor instance, Taichung Light announced on the same evening that it expects a 48% to 77% increase in net profits for 2024 due to rising demand for optical devicesAdditionally, companies like Zhongheng Electric and Dazhu CNC are forecasting net profit increases of 154% to 218% and 99% to 136%, respectively, also highlighting robust demand stemming from the computational power industry, particularly for AI servers.

The surge in profits isn't limited to the tech sectorNumerous companies across various industries have reported impressive earnings forecasts

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Guojin Auto, for example, expects a staggering increase of 1680% to 2016% in net profit for 2024. Meanwhile, Xinhu Insurance is forecasting a sizable increase in net profit of 175% to 195% for the same period, highlighting the diverse sectors benefiting from current market conditions.

Leading optical module companies exceed expectations

On the evening of January 20, Xinyi Technology's announcement confirmed a net profit expectation of between 2.8 billion and 3.05 billion yuan for 2024, surpassing market expectationsPrevious forecasts from brokerages had averaged around 2.3 billion yuan.

Xinyi Technology provided insight into the reasons behind this substantial increase, noting the continuous growth in computing power investments and the swift rise in demand for high-speed product offerings, leading to a dramatic rise in both sales revenue and net profit compared to the previous yearThe period also saw positive impacts from interest income and foreign exchange gainsThe non-recurring gains during this period were estimated to affect net profit by around 9 million yuan.

According to forecasts from LightCounting, by 2024, the market for optical modules used in AI clusters is expected to double, with a continued robust growth rate anticipated into 2025. Analyses suggest that Xinyi Technology, as a leading manufacturer in this space, is well-positioned in the competitive landscape, and its revenue is likely to continue growing, thus opening further opportunities for expansion.

Recently, Xinyi Technology engaged with over twenty investment institutions, including E Fund and Southern Fund, indicating their findings suggest that applications for CPO (Central Processing Optical) in the 800G optical module products are currently non-existent

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Instead, the market continues to favor the 1.6T pluggable optical moduleXinyi reports that strides have been made in CPO technology, and when a robust ecosystem is developed in the future, the company is poised to compete effectively in related products.

In previous weeks, TSMC provided updates during their earnings call that advancements in CPO technology are proceeding well, with expectations for large-scale production in 1 to 1.5 yearsHuatai Securities has mentioned that, although challenges in CPO deployment remain, including technology reliability and production yield, the involvement of companies like NVIDIA and Broadcom suggests a quicker introduction to the market, perhaps heralding an era of mass production by 2026. Significant catalysts are predicted for 2025, with notable events like GTC, OFC, and optical exhibitions capturing attention.

China's optical communication industry holds substantial advantages globally; firms such as Zhongji Xuchuang, Tianfu Communication, and Xinyi Technology have been deeply engaged with overseas clients, collaborating closely for product innovation in the CPO sector, benefitting from years of accumulated expertise.

Among these firms, Zhongji Xuchuang has established itself as a global leader in optical module solutions, serving major clients such as Google and ZTEMeanwhile, Xinyi Technology, through the strategic acquisition of Alpine, has reinforced its position in the competitive landscape of silicon optical module technologyAdditionally, Tianfu Communication is notable in the optical fiber connection market, providing manufacturing services for industry leaders like Cisco and NVIDIA.

Other companies also report significant profit increases

On the evening of January 20, hundreds of A-share listed companies released their forecasts for 2024 annual performance, underscoring a notable trend of substantial profit growth across many sectors.

Guojin Auto, for example, announced it anticipates a net profit of approximately 370 million to 440 million yuan attributable to shareholders, representing an increase of around 3.49 billion to 4.19 billion yuan compared to the previous year, a growth of 1680% to 2016%. The company attributes this jump to its consistent operational strategy and effective management practices.

Meanwhile, Ruixin Microelectronics announced it expects revenues of 3.1 billion to 3.15 billion yuan for 2024, marking a projected growth of 45.23% to 47.57%. Its projected net profit for the year is to be between 550 million and 630 million yuan, indicating a remarkable year-on-year growth of 308% to 367%. This expected growth is linked to the revival of global electronics markets and the accelerating development of AI technologies.

Taichung Light has forecasted a net profit between 230 million to 275 million yuan for 2024, translating to growth of 48% to 77%. This anticipated increase is associated with the ongoing advancements in AI technology, which have significantly boosted the demand for optical devices, further fueled by rapid data center construction worldwide.

Dazhu CNC expects its net profit for 2024 to be between 270 million to 320 million yuan, reflecting a growth of 99% to 136%. Similar to other tech players, Dazhu attributes its performance increase to a recovering consumer electronics market, as well as demands from the AI server market, which is stimulating spending from downstream clients.

Zhenyu Technology anticipates a net profit of 220 million to 280 million yuan for 2024 — symbolizing a towering increase of 414% to 555%. The company's consistent operational planning and enhanced production capabilities are expected to enhance overall profitability.

BOE Technology Group has projected net profits of 5.2 billion to 5.5 billion yuan for 2024, which would mean a year-on-year growth of 104% to 116%. Against various external challenges, the company has managed to retain its leadership in the semiconductor display sector, capitalizing on available opportunities to elevate performance significantly.

Qianzhao Optoelectronics has indicated that it expects its net profit for 2024 to range from 87 million to 111 million yuan, reflecting growth of 175% to 251%. This growth is largely attributed to the company's pursuit of product restructuring and enhanced operational efficiency.

Tianshan Aluminum has projected a net profit for 2024 in the ballpark of 4.45 billion yuan, representing a compound year-on-year rise of 102% credited to increased pricing for self-produced alumina and aluminum ingots, despite a decline in other costs.

Finally, First Capital reports an anticipated net profit of between 850 million and 935 million yuan for 2024, indicating growth of 157% to 183%. This growth is linked to the company’s proactive market positioning and the significant uptick in its proprietary investment business performance.

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