Shares of Sterlite Technologies and HFCL rallied 5% each on Wednesday following reports that the US administration is considering a ban on Chinese data centre equipment imports. Sterlite Technologies touched a day’s high of Rs 636, while HFCL climbed to Rs 212.

According to a Reuters report, the Trump administration is drafting a ban on US imports of new models of Chinese data centre components, citing four people familiar with the matter. The move is aimed at protecting the infrastructure supporting the rapid growth of artificial intelligence.

Also Read |PNB Housing Finance shares rally 5% after Q1 profit rises 4% YoY, loan assets jump 15%

The report further said that the Federal Communications Commission (FCC), which oversees the US telecom industry, is working on a measure to bar imports of new Chinese optical transceivers. These components enable data to travel over fibre-optic cables at the speed of light within data centres.

The move, which has not been previously reported, aims to prevent Chinese firms from stealing data, installing malware or disrupting services at US data centres that house the chips used to train and run AI models.

Reuters reported that the FCC could still modify or shelve the proposed restriction, with sources speaking on condition of anonymity due to the sensitive nature of the matter. However, the move marks another effort by the Trump administration to limit Chinese technological influence in critical US industries before such products become embedded in supply chains.
“Transceivers definitely pose a risk. As the data centre buildout scales up, you want to make sure the data centre supply chain is secure from the get-go,” said Divyansh Kaushik, an AI policy expert at Washington, DC-based advisory firm Beacon Global Strategies.In an exchange filing on Tuesday, HFCL said its board has approved a further expansion of its optical fibre and optical fibre cable manufacturing capacities, with a total capital outlay of around Rs 400 crore. The expansion will be funded through an appropriate mix of internal accruals and debt, as required.

HFCL said the decision was supported by its strong order book for optical fibre cable (OFC) and optical connectivity products, a robust pipeline of additional business opportunities, and a favourable long-term global demand outlook.

The company added that demand is being driven by rising investments in artificial intelligence (AI) infrastructure, hyperscale data centres, cloud computing, high-performance computing, 5G deployments, FTTH and broadband expansion, enterprise fibreisation, rural connectivity initiatives and telecom network modernisation programmes.

Also Read | MapMyIndia shares drop 8% despite strong Q1 earnings; PAT jumps 8% YoY

This proposed expansion is in addition to the company’s ongoing expansion programme. The board has now approved an additional capacity expansion of 4.60 million fkm per annum in optical fibre (OF) and 14.0 million fkm per annum in optical fibre cable (OFC) capacities. Upon completion of these expansion programmes, HFCL’s total OF manufacturing capacity will increase to 38.50 million fkm per annum, while OFC manufacturing capacity will rise to 56.36 million fkm per annum.

The proposed expansion is expected to be completed by July 2028. It is aimed at helping the company cater to rising demand for OFC and optical connectivity products across domestic and international markets, while addressing requirements from existing customer commitments, a healthy order book and an expanding business pipeline.

The Reuters report also highlighted that such a ban could increase costs for US cloud firms such as Amazon Web Services, as they may have to shift to alternative suppliers, including US-based Coherent and Lumentum.

Earlier, the FCC had imposed similar curbs on Chinese drones, routers, robots and inverters.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)