A top-performing fund manager has stated that the recent selloff in China's optical communications sector has actually strengthened the investment thesis for one of the hottest areas within the AI trade. Liang Ce, co-manager of the Qianhai Kaiyuan Hong Kong-Shanghai-Shenzhen Lesheng Life Flexible Allocation Mixed Fund, believes the correction has largely digested the excessive froth accumulated during the "brief but extreme" bull run in the second quarter. Compiled data shows the fund has delivered a staggering 182% return over the past year, outperforming 99% of its peers and ranking second among more than 2,000 similar funds tracked by Eastmoney.

"The long-term direction for optical communications remains unchanged, with new applications continuously emerging," Liang said in an interview. "It's like sailing a ship: the course is clear, and the challenge lies in navigating through the waves, not altering the heading."

As AI-powered data centers are being built at an unprecedented pace, demand for optical communication components has surged dramatically. Optical modules form the core infrastructure connecting AI data centers, converting high-speed electrical signals generated by processors into optical signals to ensure rapid transmission and data integrity between server racks. Riding the wave of AI hardware stock gains, shares of companies like Zhongji Innolight (03308) and Eoptolink Technology (300502.SZ) at one point this year doubled from their end-2025 levels. These surges propelled the STAR 50 Index to a record 76% rally in the second quarter.

However, in recent weeks, concerns over excessive leverage, surging valuations, and the possibility that the U.S. might ban certain Chinese components have driven investors to flee. According to the latest available data as of the end of June, Eoptolink, Changguang Huaxin (688048.SH), and Zhongji Innolight ranked as the fund's top three holdings. Liang noted that the fund largely maintained its positions during the July selloff, as the decline was primarily driven by liquidity factors.

Despite suspending new subscriptions in mid-May, the fund's assets under management still grew nearly eightfold in the April-to-June quarter, reaching RMB 8.2 billion (approximately $1.2 billion). The fund has since resumed subscriptions as of July 31. However, Liang also hinted that the recovery in optical communications stocks could be gradual. "It's hard to point to a single event that could suddenly restore optimism," he said. "Some investors remain deeply underwater, while others have completely exited and are reluctant to return."

Liang also expressed optimism about supply chain opportunities tied to "neoclouds" — computing service providers that lease chips and computing resources. He continues to maintain a positive outlook on the domestic computing ecosystem, citing strong demand resilience and continuously improving supply conditions. "The industry and capital markets are so enthusiastic because AI keeps proving to be more powerful than people expected," Liang said. "But if the day comes when scaling model parameters no longer yields better performance and technological progress stalls, then this investment logic will reach its limits."