Trump Administration Drafts Ban on Chinese Data Center Components

The Federal Communications Commission (FCC) is reportedly working on a ban to bar imports of new Chinese optical transceivers, which are used in data centers. According to Reuters, this proposal aims to curb cybersecurity risks from Chinese-made AI networking components.

Optical transceivers allow data to travel across fiber-optic cables at light speed inside data centers. A ban on these components would likely push American cloud giants like Amazon Web Services toward U.S.-based alternatives, such as Coherent (COHR) and Lumentum (LITE).

Both COHR and LITE stocks rallied in pre-market trade after the report, with COHR stock rising by up to 13% and LITE stock jumping over 10%. In contrast, Amazon's stock dropped over 2%.

Nvidia has already positioned both companies as strategic suppliers, signing multi-year agreements that included billions of dollars in procurement commitments and a $2 billion investment in each company to secure production capacity for next-generation co-packaged optics technology.