Social Security Fund continues to increase its holdings! This sector will produce more major winning stocks!

Ask AI · What industry confidence signals are reflected by social security funds adding to positions in CPO stocks?

By | Shangyang

‍On March 27, China A-share optical module (CPO) stocks showed a “early-session pressure, mid-session repair” type of choppy rebound, with Gukong Technology and Tengjing Technology both setting new all-time highs again. A veteran market participant, Peng Zu, who has long been bullish on investment opportunities in the CPO sector and successfully uncovered big winners such as Tianfu Communications and Yuanjie Technology, believes that the CPO sector is the best direction in the first half of this year; under multiple catalysts—including the continued surge in AI compute demand, supportive industrial policies, and accelerating technological iteration—near-term volatility will not change the sector’s long-term growth logic.

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How will the sector play out in the future? Which companies will keep moving upward?

Index turns positive; individual stocks hit new highs

On Friday’s early trading session, affected by the overall market’s lower open, the CPO sector also came under pressure. After the sector index opened lower, it weakened for a while, becoming the main drag for the early session. However, as market sentiment gradually improved, the optical chips and core materials segments took the lead, driving a gradual rebound in the sector and enabling the index to turn positive successfully. Among individual stocks, Tengjing Technology and Gukong Technology again refreshed their all-time highs (see Figure 1 and Figure 2).

Tengjing Technology, a domestic core high-tech enterprise in the field of precision optics and optoelectronics, focuses on R&D and production of products such as precision optical subcomponents and fiber optic devices. Its downstream coverage deeply extends to key areas such as optical communications and semiconductor equipment. Relying on a full-industry-chain layout of “precision optical components—fiber optic devices—optical test instruments,” the company has fully benefited from upgrading demand for optical modules driven by AI compute. According to institutional forecasts, as optical communications upgrades keep progressing, Tengjing Technology’s net profit growth rate attributable to shareholders in 2026 will remain at 36.1%-45.7%. With strong long-term growth potential, the current institutional target price range implies an upside of more than 20%.

As one of the few companies globally that masters the core technology of lithium niobate modulator chip, Guangku Technology focuses on core businesses such as fiber laser device and optical communication devices. The company concentrates on R&D of CPO-related components and, with its 8-inch wafer-level thin-film lithium niobate modulator mass-production technology, can be adapted to demand for 1.6T optical modules. Compared with traditional solutions, performance improves significantly. At the same time, it is deeply tied to top customers such as NVIDIA and Broadcom; through its subsidiary Jiahua Microjet’s micro-optical connectors and its own-developed silicon photonics chips, it has successfully entered NVIDIA’s 1.6T optical engine supply chain. Benefiting from the optical module upgrade demand driven by AI compute, the company’s production capacity and sales of optical communication devices continue to grow. In 2025, its net profit attributable to shareholders increased year over year by 163.76%. The gross margin of its core products is far above the industry average, and the market widely recognizes its long-term growth potential.

One of the best directions in the first half of the year

The localized rebound of the CPO sector is inseparable from the combined effect of multiple industrial catalyst factors. Among them, policy support, positive signals released by industry conferences, and the continued surge in AI compute demand are the core drivers.

On March 23, Shenzhen officially issued the 《Shenzhen Action Plan for Accelerating the High-Quality Development of the Artificial Intelligence Server Industry Chain (2026-2028)》, clearly stating the goal of promoting the generational upgrade of optical modules from 800G to 1.6T/3.2T, with a focus on developing CPO/LPO/NPO encapsulated optical modules, and pushing breakthroughs and large-scale applications in core technologies such as high-end thin-film lithium niobate and high-end indium phosphide. This provides clear policy guidance and support for the development of the CPO industry, further boosting market confidence.

Earlier, the 2026 Fiber Optic Communications Conference and Exhibition (OFC 2026), held from March 15 to March 19, also brought important industry catalysts to the CPO sector. This conference marks a historic transition of fiber optic communications exhibitions from traditional telecom exhibitions to a core gathering focused on AI infrastructure. AI data center optical interconnect has become the absolute core topic. As CPO is an important development direction for optical interconnect technology, its technical advantages and industrialization progress have drawn widespread attention in the industry. During the conference, international leading companies such as Lumentum disclosed that they expect EML production capacity by the end of 2026 to grow by more than 50% compared with 2025. TSMC also plans to achieve production capacity of 10,000 photonic integrated circuit (PIC) wafers per month in the first quarter of 2027. This further clarifies the timeline for large-scale development of the CPO industry, injecting confidence into the sector’s long-term development.

From the perspective of industry demand, the continued rise in demand for high-speed optical modules driven by the explosion of compute from generative AI large models has become a core support for the CPO industry’s development. As AI training clusters expand to million-GPU level scale, the power consumption, latency, and reliability of optical interconnect become key optimization targets. And through integrating the optical engine and switching chip together in the same substrate, CPO technology offers core advantages such as improving energy efficiency by more than 65% and significantly reducing latency, perfectly matching the high-end requirements of AI data centers. According to industry estimates, the shipment volume of CPO optical engines in 2026 is expected to reach 600k-1M units, and in 2027 it will exceed several million units, as the pace of large-scale industrialization keeps accelerating.

Regarding the future performance of the CPO sector, Peng Zu believes that in the short term the sector may still maintain a choppy and differentiated pattern, with some volatility influenced by factors such as broader market sentiment and capital flows. But in the long run, the core logic of industrial upgrading and demand surges remains unchanged. The sector has broad room for growth and is one of the best directions in the first half of the year. In fact, since last year, Peng Zu has repeatedly shared investment opportunities in the CPO concept in publicly available videos; the companies he focuses on—such as Tianfu Communications and Yuanjie Technology—have all delivered several-fold gains afterward (see Figure 3).

Social security funds continue to add to positions

Currently, as listed companies continue to release their 2025 annual reports, eight CPO concept stocks have already published their 2025 annual performance in the form of official annual reports or annual report performance quick reports. Among them, seven companies achieved full-year profitability while both net profit attributable to shareholders and operating revenue increased compared with 2024 (see the appendix table).

At present, the “most profitable” company in the CPO sector is undoubtedly ZTE (Midas) Chuangxin. In 2025, it achieved net profit attributable to shareholders of 1.6T yuan, a year-on-year increase of 108.81%. In its announcement, the company stated clearly that its performance growth in 2025 was mainly benefited by strong investment from terminal customers in compute infrastructure. The company’s optical module product shipment volume grew rapidly, with the proportion of high-speed and high-gross-margin products continuing to rise. Meanwhile, through measures such as optimizing product solutions and improving operational efficiency, the company further improved its profitability.

The performance of “the new aristocrat of 1,000-yuan stocks,” Yuanjie Technology, is also very impressive, with the full-year results successfully turning losses into profits. In 2025, the company’s revenue growth was mainly due to the growth of data center business revenue, which increased the proportion of the company’s overall revenue. With further optimization of the company’s overall product structure, and because data center products have relatively high gross profit margins, the company’s net profit increased year over year. In addition, the company indirectly participates in equity investments through private equity funds, mainly investing in enterprises with development potential in high-tech fields such as next-generation information technology and smart manufacturing. As the valuations of the investee companies rise, investment gains are generated. Moreover, as government subsidy projects complete acceptance, the confirmation of government subsidies also contributes to net profit to some extent.

With earnings growth, “national team” funds are also continuously adding to positions in CPO concept stocks—for example, Anyu Technology. On September 25, 2025, the Social Security Fund 17022 portfolio became the company’s tenth largest shareholder in a newly entered position, holding 4.1872 million shares. Just five days later, data on holdings among the top ten shareholders at the end of the third quarter showed that the Social Security Fund 17022 portfolio increased its holdings by 111.8k shares; its holdings at quarter-end rose to 1.6T shares. On March 10, the company released its 2025 annual report. The Social Security Fund 17022 portfolio continued to publicly hold Anyu Technology as a heavy position, and during the reporting period it further increased holdings by 1.6T shares. Its holdings at quarter-end increased to 3.2T shares, and its ranking also rose further to become the seventh largest shareholder (see Figure 4).

Tongfu Microelectronics, Hengtong Optic-Electric, FiberHome Xinwei, and firms such as FiberHome Guangxun Technology have not yet released their 2025 annual reports, but based on institutional holdings in the third-quarter reports, all of the top ten shareholders also include social security funds, and they are all newly added heavy positions by social security funds at the end of the third quarter.

（The individual stocks mentioned in the article are only examples for analysis and do not constitute a buy/sell recommendation.）