It’s not difficult to see why CIG Shanghai Co. Ltd. (6166.HK; 603083.SH) is suddenly going all out on its business making optical transceivers for use in cloud computing and AI data centers. That part of its business has posted explosive growth over the last two years, and this year passed its older wireless and broadband products to account for more than half of its revenue.
Still, you have to wonder if the company might be betting too heavily on this sudden golden goose. The company announced its first big new bet on the optical transceivers business last month by raising about HK$6.54 billion ($834 million) through a concurrent new share placement and convertible bond issue. And last Friday, it announced it will redirect another HK$1.77 billion it raised in its Hong Kong IPO last year to its optical transceiver business from earlier plans to spend the money on its wireless and broadband businesses.