Volkswacht Bodensee - AI data centre supplier Zhongji InnoLight tumbles on Hong Kong debut

Zhongji InnoLight is a leading manufacturer of optical transceivers used in AI data centres to transmit vast amounts of digital information through optical fibres.

The firm has been riding high on the global data centre boom, supplying the likes of Google, Nvidia and Huawei, but was blacklisted by the US Department of Defense in June alongside other Chinese firms over its alleged military ties.

The Shenzhen-listed firm priced its shares at HK$980 on Thursday, raising about HK$53.4 billion (US$6.8 billion), the most since Chinese tech behemoth Alibaba listed in the city in 2019.

But it sank 9.5 percent to HK$886 in early trade.

The company rejected the US claims in its filing to the Hong Kong stock exchange, saying "we have not engaged in any military-related businesses or activities".

It warned investors that the blacklist "may subject us to increased scrutiny and potential further government actions".

The majority of its revenue was derived from the US market, the firm's prospectus showed.

China and the United States are locked in a race for dominance in the fast-moving AI field, fuelling huge global expansion of data centres -- warehouse-like facilities crammed with computer servers.

Thursday's listing is the latest in a recent run of blockbuster debuts from Chinese AI-related companies in Hong Kong, indicating optimism for China's ambitions in the sector.

Zhongji InnoLight's "manufacturing scale and position in high-speed optical transceivers make it a significant supplier to US hyperscalers", said Poe Zhao, founder of analysis publication Hello China Tech.

The company said it would use the proceeds to expand its global production capacity and boost its supply chain resilience.

Zhongji InnoLight is expected to maintain around 30-percent market share in the global AI transceiver market thanks to its "strong R&D and effective supply chain management", Nomura analysts said in a July 6 note.

InnoLight's listing is in line with what analysts view as a deliberate push by Beijing authorities to use the capital markets to attract the overseas funds needed to finance national technology goals.

Last week, the Hong Kong stock exchange eased rules to allow companies from all sectors to submit confidential listing applications, with it boasting more than 520 applicants.

F.Fehr--VB