Chinese Innolight’s $7 bln IPO surfs US AI boom

Innolight's components help shift data through fibre-optic cables and are crucial for advanced computing systems whose scale strains the limits of legacy technology using copper wiring. It boasts about a quarter of the global market for optical interconnects and has a near monopoly in the next generation of those devices, according to Counterpoint. No wonder business for the $187 billion company is booming: net profit doubled last year to 11.6 billion yuan ($1.7 billion) and nearly quadrupled in the first quarter, its prospectus shows. Shares have quintupled over the past year.

Innolight's business skews toward the U.S., and customers like Meta META.O and Nvidia NVDA.O, because that is where advanced AI infrastructure is concentrated. In China, tech giants such as Alibaba 9988.HK, Tencent 0700.HK and Baidu 9888.HK are technologically restricted to a different architecture by Washington’s semiconductor export controls. Since they have limited access to cutting-edge semiconductors from the U.S., their datacentres don't need as many sophisticated transceivers. Some 62% of Innolight’s sales were in the U.S. in the first quarter, versus less than 4% in China.