Reports that the Federal Communications Commission is preparing restrictions on new Chinese optical transceivers have already started repricing the companies that supply the high-speed links inside AI data centers.
The search response has been unusually sharp. FinanceFeeds data show Nokia moving from just eight impressions over 28 days to 7,250 in three days, while Applied Optoelectronics went from zero to 4,427. The market reaction has been similarly concentrated around companies that could pick up business if U.S. data-center operators have to reduce their reliance on Chinese modules.
The key qualification is that there is no published FCC rule specifically banning Chinese optical transceivers yet. Reuters reported on August 4 that the agency is drafting a measure targeting new Chinese models, with officials hoping to publish it this year. The sources also said it could still be modified or abandoned.
What the Draft Actually Proposes, and Its Status
The reported plan would bar imports of new Chinese optical-transceiver models rather than order U.S. data centers to rip out equipment already installed. Reuters reported that the proposed structure could initially restrict new transceiver models and then exempt many non-Chinese suppliers.
The distinction between a reported draft and an adopted FCC rule matters.
The FCC’s latest public equipment-authorization action, adopted July 23, strengthens restrictions involving equipment and logic-bearing hardware tied to entities already on its Covered List. But that document does not establish a standalone Chinese optical-transceiver ban. In fact, an FCC footnote discussing the optical-transceiver market names Coherent and Innolight among key players and notes that the companies cited there did not appear on the Covered List.
That leaves major questions unanswered, including how the FCC would define a Chinese supplier, what qualifies as a new model and how modules assembled outside mainland China would be treated.
Who Benefits — the Non-Chinese Supplier List
The most direct publicly traded beneficiaries are Coherent, Lumentum and Applied Optoelectronics. When the Reuters report landed on August 4, Lumentum rose about 7%, Coherent 11% and AAOI 18%.
Counterpoint Research estimates that Innolight controls roughly 27% of global data-center transceiver revenue, with Coherent at about 17%. Chinese manufacturers including Innolight, Eoptolink, Accelink and Source Photonics together account for around 60% of global optical datacom transceiver revenue, meaning even a restriction limited to future products could redirect a meaningful amount of procurement.
AAOI offers particularly clean exposure. The company reported Q2 revenue of $191.9 million, up from $103 million a year earlier, while shipments of its 800G products more than doubled sequentially. Management said manufacturing capacity was approaching 200,000 units per month and is expected to reach around 650,000 800G and 1.6T units per month by year-end. AAOI also expects demand to exceed its production capacity through mid-2027.
That capacity constraint is also the catch: removing Chinese supply does not automatically mean Western manufacturers can immediately replace it.
Nokia’s Q2 as the Demand-Side Evidence
Nokia provides another way to see what is happening underneath the regulatory story.
Its Q2 results showed Network Infrastructure sales increasing 12% in constant currency, including 20% growth in Optical Networks and 16% in IP Networks. More importantly, Nokia’s own release reported that sales to AI and Cloud customers increased 105%, reaching €446 million, or roughly 9.3% of total quarterly sales. AI and Cloud orders reached €2.8 billion.
Nokia said about half of those orders are expected to convert into revenue over the following 12 months and identified supply, rather than demand, as the industry’s principal constraint.
The headline full-year comparable operating-profit range also moved to €2.1 billion-€2.6 billion from €2.0 billion-€2.5 billion. Nokia, however, explicitly described the €100 million increase as a technical revision caused by discontinued-operations accounting, saying its operational outlook was unchanged.
Nokia’s U.S. ADR closed at $10.76 on August 14, up 1.89% for its fourth consecutive gain. That followed a run that had already pushed the stock sharply higher during the month. The broader setup was covered in FinanceFeeds’ earlier Nokia stock analysis.
The Counter-Signal: Exemption Rumours Are Still Unverified
There has been market chatter that Innolight or Eoptolink could eventually receive exemptions, but there is no public FCC document confirming company-specific exemptions, so those rumours should not be treated as fact.
What is confirmed is narrower: Reuters’ sources said many non-Chinese suppliers could receive exemptions from the initial restriction structure. The FCC has not published the final definition of a Chinese supplier or explained whether ownership, manufacturing location, final assembly or another test would determine eligibility.
That uncertainty matters because Innolight and Eoptolink have manufacturing operations outside mainland China, including in Thailand, while the optical supply chain itself remains heavily interconnected between Chinese assemblers and Western suppliers of DSPs, lasers and optical chips.
The volatility is already visible. By around 1:15 p.m. ET Tuesday, AAOI was down about 13.5%, Coherent 11.8% and Lumentum 9.6%, while Nokia was off roughly 3.6%. The pullback does not establish a regulatory change; it shows how quickly expectations around the optical trade are moving before an actual rule exists.
What to Watch Before the Rule Is Finalised
The next catalyst is the FCC itself.
Investors need the published text to establish whether restrictions apply only to genuinely new models, whether existing authorizations remain usable, how corporate nationality is defined and which non-Chinese suppliers qualify for exemptions.
Those details determine whether this becomes a gradual procurement shift or a much more disruptive restructuring of the AI optical supply chain. Until then, Coherent, Lumentum, AAOI and Nokia have demand on their side, but the regulatory upside being priced into the group remains attached to a rule the FCC has not yet formally published.
Other Articles
