The Donald Trump administration’s push to ban China’s role in the U.S.-AI supply chain may have an unintended consequence: making it more difficult and expensive to build the very AI infrastructure U.S. companies are racing to deploy.
That’s the takeaway from a new BNP Paribas note, which argues that a proposed Federal Communications Commission ban on new imports of Chinese-made optical transceivers could ripple far beyond Chinese manufacturers, affecting companies including Broadcom Inc. (NASDAQ:AVGO), Marvell Technology Inc. (NASDAQ:MRVL), Credo Technology Group Holding Ltd. (NASDAQ:CRDO), Nvidia Corp. (NASDAQ:NVDA) and Advanced Micro Devices Inc. (NASDAQ:AMD).
Why Optical Transceivers Matter to AI
Optical transceivers rarely grab headlines, but they are a critical piece of modern AI infrastructure. These devices convert electrical signals into optical signals, allowing the enormous volumes of data generated by AI chips to move rapidly between servers inside data centers.
As AI clusters expand, those networking components become just as important as the GPUs performing the computations. Without enough optical transceivers, even the most advanced AI chips cannot communicate efficiently across thousands of interconnected servers.
According to BNP Paribas analyst Karl Ackerman, Chinese manufacturers are expected to control more than 60% of the global data center optical transceiver market in 2026, with Innolight and Eoptolink among the largest suppliers serving the U.S. market.
The Ban Could Reach Beyond Chinese Companies
At first glance, restricting Chinese suppliers appears to create an opportunity for non-Chinese competitors. But Ackerman argues the supply chain is far more interconnected than that simple narrative suggests.
Optical transceivers rely on digital signal processors, or DSPs—specialized chips that process the high-speed data traveling through fiber-optic networks. BNP estimates those processors account for roughly 40% of a transceiver’s bill of materials.
That means Chinese transceiver makers are also major customers of DSP suppliers including Broadcom, Marvell, Credo and MaxLinear Inc. (NASDAQ:MXL). If Chinese production were curtailed, those chipmakers could lose a meaningful source of demand.
The effects could spread further. Laser suppliers such as Lumentum Holdings Inc. (NASDAQ:LITE) and Coherent Corp (NYSE:COHR) also sell components into Chinese transceiver manufacturing, while companies supplying semiconductor materials and manufacturing equipment could see weaker demand if production slows.
Nvidia and AMD Could Face Another AI Constraint
The implications extend beyond component suppliers.
Ackerman notes that optical transceivers produced by Innolight and Eoptolink are widely used in AI server systems built around Nvidia Corp‘s (NASDAQ:NVDA) upcoming Vera Rubin platform and Advanced Micro Devices, Inc‘s (NASDAQ:AMD) MI450 accelerators.
Replacing that manufacturing capacity would not be straightforward. BNP argues U.S. suppliers are unlikely to immediately produce enough 800G and emerging 1.6-terabit transceivers to meet demand as hyperscalers ramp deployments of next-generation AI infrastructure.
Instead of strengthening the domestic AI ecosystem, the bank believes an outright ban could tighten supplies of critical networking equipment, raise infrastructure costs and add further inflationary pressure to already record AI capital spending.
The timing is particularly important. BNP forecasts the data center optical transceiver market will grow 41% year over year to roughly $31 billion in 2026, driven by the rollout of Nvidia’s Vera Rubin systems, AMD’s MI450 platform, Alphabet Inc.‘s (NASDAQ:GOOGL) (NASDAQ:GOOG) TPU8 processors and Amazon.com Inc.‘s (NASDAQ:AMZN) Trainium 3 chips.
For investors, the report highlights an increasingly important reality of the AI buildout: the next supply-chain bottleneck may not come from GPUs, but from the networking hardware that connects them.
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