Trump Administration Drafts Ban on Chinese AI Data Components

The Federal Communications Commission (FCC) is drafting a ban on the import of new Chinese data center optical transceivers to secure the infrastructure supporting the artificial intelligence boom. The Trump administration aims to prevent Chinese firms from stealing data, installing malware, or disrupting services, citing the previous difficulty of removing Huawei equipment as a primary concern for supply chain security.

To avoid the immediate cost of replacing existing hardware, the proposed restriction specifically targets new models. The measure is expected to take effect within the current year. The move would significantly impact major Chinese suppliers such as Zhongji Innolight, which holds approximately 27% of the global data center transceiver market, and Eoptolink Technology Inc. Reports of the ban triggered a decline in shares for these Chinese firms while sparking a rally for optical-equipment makers in the U.S., Europe, and Japan.

While U.S. firms like Coherent and Lumentum may benefit, analysts note that American companies currently lack the scale to fully replace Chinese vendors, who control more than half of the high-speed transceiver market. This reliance may increase costs for U.S. cloud providers like Amazon Web Services. The Government of China, via its embassy in Washington, condemned the move as a smear campaign and warned that Beijing will take necessary measures in response to actions that cause material harm to its interests.