On January 22, the Chinese A-share market experienced a notable contraction, primarily influenced by fluctuations in heavyweight sectors such as liquor and new energyBy the end of trading, the Shanghai Composite Index closed at 3,213.62 points, reflecting a decline of 0.89%. Meanwhile, the Shenzhen Component Index and the ChiNext Board also saw declines, with the former closing at 10,225.87 points down 0.77% and the latter at 2,101.03 points down 0.54%. Overall trading volume across the Shanghai and Shenzhen exchanges amounted to 1.1358 trillion yuan, a decrease of around 70 billion yuan compared to the previous day.

Amidst this market backdrop, the AI hardware sector continued its upward trajectory, demonstrating impressive growth that has captured the attention of investorsSince mid-January, components such as high-speed copper cables and liquid cooling servers have been at the forefront, driving a wave of stock surges in these areasRecently, companies like Huamai Technology and Xinya Electronics achieved consecutive days of limit-ups, while Industrial Fulian, a leader in the liquid cooling server market, also hit the upper trading limit with a significant turnover of 9.093 billion yuan on the same day.

The ongoing competition between optical modules and copper cables in the realm of AI technology has remained a hot topicDubbed the "light vs. copper debate," this contention arises from the inherent technological distinctions, cost differences, and application scenarios of eachOptical modules are championed for their high bandwidth, low attenuation, and resistance to electromagnetic interference, making them ideal for long-distance, high-speed data transmissionOn the other hand, copper cables offer an efficient solution for short-distance transmission, characterized by their low power consumption, cost-efficiency, and stable performance.

The recent surge in copper cable technology can be attributed to endorsements by key industry figures, notably Jensen Huang, CEO of NVIDIA, who publicly advocated for the continued use of copper technology

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Huang remarked, “We should keep using copper technology as long as possibleAfter that, if needed, we can turn to silicon photonics technology, but I think we need a few more years.” Such endorsements from influential leaders have significant impacts on market trends and investor sentiment.

Nevertheless, as some of these stocks witness rapid expansions in short time frames, it's imperative for investors to remain vigilant about the underlying transaction risksFollowing recent trading volatility, Huamai Technology issued a statement regarding irregular stock trading activitiesThe company emphasized that its core business revolves around communication infrastructure, including optical distribution frames and optical fibers, with a recent rolling P/E ratio reflecting losses that deviate significantly from industry normsThe advisory was a reminder for investors to approach the secondary market with caution and awareness.

Liquid cooling servers emerge as another pivotal investment theme amid the AI surgeResearch from Tianfeng Securities indicates that the proliferation of technologies like AI is driving a simultaneous increase in data center constructionDue to the heat generated from operating these data centers, cooling solutions become essential to ensure stable and safe performanceAs outlined by market projections, the liquid cooling server market in China is expected to reach approximately 68.2 billion yuan from 2022 to 2027, demonstrating a remarkable compound annual growth rate of 56%. Furthermore, the global liquid cooling market is anticipated to see a substantial rise, expanding from over $2 billion in 2022 to over $12 billion by 2032.

As the market navigates these dynamics, it appears to be approaching a phase characterized by high cost performanceThe first three trading days of the current week were marked by fluctuations, with the Shanghai Index registering three consecutive downward trendsMarket participants observed a contraction in trading volumes, similarly downtrending to levels witnessed since late September of the previous year

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