Optical Communications Sector Rebounds on TSMC Progress and Nvidia Speculation

Taiwan's optical communications sector experienced a rebound last week, fueled by positive developments from industry giants. Key drivers included Taiwan Semiconductor Manufacturing Co. (TSMC) announcing clear progress on its silicon photonics (COUPE) platform, slated for mass production in the second half of 2026. Additionally, market speculation surrounding Nvidia's potential $5 billion to $10 billion acquisition of U.S. long-haul "dark fiber" infrastructure to build its own high-speed optical network has boosted sentiment.

Several stocks within the sector saw significant gains. UONIC (3081) and Wha Hsin Technology (4979) surged over 18% last week, while Broadex Technologies (3163), Data Communications Technology (4977), and Lumentum (4903) each rose more than 6%. Guang Sheng (6442) also saw a modest increase of 1.92%.

Despite the recent uptick, analysts advise caution. Huang Kuo-wei, a professional vice president at Mega International Investment Trust, described the rally as a short-term rebound following a significant price drop in the second quarter. He noted that considerable resistance lies ahead, and short-term volatility is expected. However, he remains optimistic about the long term, suggesting a potential "comeback" in the fourth quarter as underlying growth themes continue to develop.

The potential acquisition of dark fiber by Nvidia is particularly significant. Dark fiber refers to laid but unused fiber optic cables. If Nvidia proceeds with this acquisition, it could dramatically increase demand for optical communication components such as optical transceivers and amplifiers, thereby boosting the sector's performance. This move is seen as Nvidia's effort to build its own "high-speed highway" for artificial intelligence data.