US Considers Restricting Chinese Optical Transceivers for AI Data Centers, Analyst Says

The Trump administration is considering restrictions on new Chinese optical transceivers used in artificial intelligence data centers, according to an analysis from investment firm Raymond James. The potential move, aimed at securing the U.S. AI supply chain, caused shares of American optical component manufacturers to surge on the news.

Details of the Proposal

The restrictions would likely be implemented through an update to the Federal Communications Commission’s (FCC) “Covered List,” which identifies communications equipment deemed a national security risk. According to the Raymond James note, this approach would create a new approval process for future transceiver models rather than mandating a costly removal of hardware already deployed in U.S. data centers.

Key points of the potential measure include:

• It would target new foreign-produced models seeking FCC authorization.
• Existing models that have already received authorization could continue to be imported and used.
• The goal is to establish the full U.S. AI technology stack—from semiconductors to networking gear—as the global standard.

The FCC’s Covered List already includes equipment from Chinese telecommunications giants Huawei and ZTE. Optical transceivers are a critical part of the AI infrastructure, providing the high-speed links between GPUs, switches, and storage components.

Market Reaction and Beneficiaries

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Investors reacted swiftly to the news, sending shares of U.S.-based optical component suppliers sharply higher. Major movers included:

• Applied Optoelectronics (AAOI): +21.89%
• Coherent (COHR): +15.76%
• Lumentum (LITE): +9.93%

Raymond James identified Coherent and Applied Optoelectronics as the biggest potential beneficiaries of the policy. The firm noted that Applied Optoelectronics is currently the only major supplier with manufacturing facilities in the U.S., while Coherent has the capability to establish domestic production.

Geopolitical Context and Potential Risks

Analysts at Raymond James view the timing of the proposal as a calculated move to gain negotiating leverage ahead of President Trump’s planned September 24 meeting with Chinese President Xi Jinping. However, the move also carries risks of retaliation.

China has stated it will take all necessary measures in response to such restrictions. Potential retaliatory actions could include Chinese manufacturers like Innolight and Eoptolink reducing their purchases of Western components or Beijing restricting the supply of key raw materials, such as indium phosphide wafers, used in manufacturing.