By Da Cheung
The artificial intelligence (AI) boom has created a market environment where a handful of companies reap massive rewards while the rest of the market watches from the sidelines. The latest example is Yuanjie Semiconductor Technology (688498.SS), a Chinese optical component maker that has become just the eighth company in A-share history to surpass 1,000 yuan ($145) per share.
The stock this week hit a record high of 1,140 yuan, overtaking AI chipmaker Cambricon to become the second-most-expensive stock on the Chinese mainland. Since its initial public offering on the high-tech STAR Market in December 2022, Yuanjie’s shares have surged more than 1,100%, closely mirroring the 1,290% five-year gain in AI giant Nvidia’s stock.
The similarities largely end there. Nvidia boasts a market capitalization of $4.34 trillion, while Yuanjie is valued at under $20 billion. More strikingly, Nvidia trades at a relatively rational price-to-earnings (PE) ratio of around 37, compared with Yuanjie’s sky-high 1,000 — a clear sign of the speculative frenzy surrounding any company tied to the AI supply chain.
From telecom struggles to AI “water seller”
Yuanjie’s meteoric rise is rooted in the physical bottlenecks of AI. As models grow exponentially, computing power has become a premium resource. But raw processing alone is not enough; the speed and efficiency of communication networks connecting these chips in data centers are now critical constraints.
Yuanjie specializes in optical chips, which convert electrical signals into light for ultra-fast, high-bandwidth data transmission. Historically, it served as a conventional infrastructure supplier for the telecom market, working with industry giants like ZTE and Nokia.
That business struggled. Weak 5G construction and inventory clearing weighed on the company, resulting in a net loss of 6.13 million yuan in 2024.
Then came AI. Data centers demanded much higher internal communication speeds, and Yuanjie’s high-speed optical chips suddenly became highly sought after. Transforming from a traditional telecom supplier into what Chinese investors call a “water seller” — a high-margin provider supplying a hot market — Yuanjie expects a net profit of 191 million yuan in 2025, marking a remarkable turnaround.
The Nvidia spark and the optical boom
Yuanjie’s surge is indirectly linked to Nvidia’s recent architectural choices. At GTC 2026, Nvidia officially introduced optical communication for its chip-to-chip interconnects through co-packaged optics (CPO), which places optical components closer to computing chips and can cut communication energy use in AI data centers by over 70%.
Analysts say this signals a new upgrade cycle for AI computing infrastructure, reshaping the value of the optical communications supply chain.
The global industry is preparing for the shift. At the OFC 2026 optical communication exhibition in Los Angeles, major players including Lumentum and Coherent projected massive capacity expansion and a multi-billion-dollar market for CPO technologies by 2030. With overseas suppliers facing capacity shortages, Yuanjie has stepped in, working closely with leading module manufacturers like Zhongji Innolight.
Global ambitions amid a speculative frenzy
Flush with market enthusiasm, Yuanjie is planning its next moves. The company intends to invest roughly 1.25 billion yuan in a Phase II research and production base to expand high-end optical chip capacity. It also aims to list on the Hong Kong Stock Exchange within 24 months to strengthen its international capital platform.
Even with a successful pivot and ambitious expansion, Yuanjie’s stratospheric PE ratio underscores the market’s feverish state. While AI is undeniably transforming technology, the capital markets’ reaction resembles a gold rush, with investors paying astronomical premiums for a ticket to the show — leaving huge risks for those buying at the peak.
Sources:
