Trump Administration Drafts Ban on Chinese AI Optical Transceivers

The Federal Communications Commission (FCC) is drafting a proposal to ban the import of new models of Chinese optical transceivers used in artificial intelligence data centers. The Trump administration intends to publish the measure this year to prevent data theft, malware implantation, and service disruptions within critical U.S. AI infrastructure. The ban specifically targets new hardware models to avoid the immediate cost of replacing existing equipment, drawing parallels to the previous difficulties in removing Huawei technology.

Chinese firms, including Zhongji Innolight and Eoptolink Technology, currently control nearly two-thirds of the global supply of these high-precision modules. Following reports of the ban, shares of Chinese AI hardware companies slumped, with the CSI300 Telecommunication Services Index falling 6%. Zhongji Innolight, which derives approximately 62% of its revenue from the U.S. market, saw shares drop 8% in Shanghai and Hong Kong. Conversely, Western rivals such as Coherent and Lumentum saw a market rally.

The Government of China condemned the move via its embassy in Washington and the People's Daily. In immediate retaliation, China's Ministry of Commerce implemented case-by-case scrutiny of drone exports to the U.S., blacklisted Compliance Testing LLC, and added six U.S. entities to a countermeasures list. Analysts warn that the ban could create hardware bottlenecks and increase costs for U.S. hyperscalers like Amazon and Microsoft, as Western suppliers currently lack the scale to replace Chinese vendors. These escalating tensions occur ahead of a scheduled AI-focused dialogue in September and an expected visit by President Xi Jinping to the United States.