The decline in optical communication stocks feels more like a technical bear market, not a fundamental one.

I think the correction in optical stocks is nearing its end.

Taking $LITE (Figure 1) as an example, it has been consolidating for 58 days since the adjustment started on May 12, with a share price pullback of about 37%. Late July to mid-August is the earnings window for optical companies. Selling off on expectations and valuations before earnings is actually a healthy thing, releasing short-term overheated sentiment and laying the groundwork for the next rally.

I believe we are very close to the bottom, but I don’t rule out a possible second leg down. From a technical perspective, the first target above is still the daily EMA20 and EMA50 (Figure 3). If it fails to break through on the first attempt and faces resistance there, a retest and confirmation would be a normal move.

Now look at $NOK. It has been declining for six consecutive weeks, but there has been a change in recent weeks: trading volume has gradually shrunk, indicating that selling pressure is slowly weakening. With earnings still about two weeks away, a technical rebound driven by short-covering is not surprising. The stock price is now attempting to break above the short-term downtrend line. Next, focus on the resistance near EMA20 (around $13.2).

Yesterday I mentioned the 1998 example of NOK in the comments (Figure 2). Let me explain further today.

From late 1997 to mid-1998, NOK first experienced a rapid rise, then entered a consolidation period of about 10 weeks, with a maximum drawdown of about 36%. Currently, NOK’s pullback from its peak has also reached a similar level, about 34%. The rest of the story after the consolidation is well known—it rose all the way from October 1998 to June 2000. Of course, I’m not saying history will repeat itself, nor that it can replicate the gains of that era, but just to illustrate that a correction of over 30% during a bull market does not mean the long-term trend is over.

Finally, let’s talk about $MRVL (Figure 4).

I believe it is still in a stage of upward continuation, more like forming a large Bull Flag pattern. The previous gap has largely been filled, and it will likely continue to oscillate and consolidate within this range for some time, waiting for new catalysts.

If you still believe in the long-term logic of AI infrastructure, then what you need to monitor are corporate earnings, capital expenditures of giants, and orders, not daily stock price fluctuations.

Starting at the end of this month, giants like Microsoft, Meta, and Amazon will release their earnings reports one after another. I still tend to think that the AI arms race won’t end so quickly. Two pieces of evidence I posted yesterday: Meta plans to invest $10 billion to build a data center in Canada, and Amazon plans to invest $5 billion to build a data center in the Philippines. If computing power is truly in surplus and capex is being cut as Wall Street claims, why are these giants still increasing capital spending? Use logic to think. Whoever significantly cuts capex first may see the gap in models, computing power, and ecosystem widen further in the coming years. So I am more focused on management’s forward guidance on CapEx.

To summarize

Remember, pullbacks and washouts in a bull market are meant for better upside. As long as you believe it is still a bull market and hasn’t turned bearish, you shouldn’t be pessimistic about any correction. Take this Bitcoin bull cycle as an example: in 2023, it dropped from 32,000 to 25,000; during the 2024 uptrend, from 74,000 to 49,000; in 2025, from 108,000 to 75,000. Everyone shouted that the bull market was over, but each time it turned out to be just a consolidation mid-way. Because most people know the four-year cycle is supposed to end by late 2025, so being a slow and patient holder of spot until the cycle ends—isn’t that simple? But 90% of people can’t do it because they are heavily influenced by the pessimistic sentiment in between. Now AI is the same, except the anchor has shifted from the four-year cycle to whether giant capex has been significantly cut, whether AI commercialization revenue and token growth have slowed, whether HBM and data center demand has weakened, whether AI infrastructure companies’ earnings continue to grow, and whether global liquidity is still improving (by the way, M2 money supply posted its largest monthly increase in five years). If none of these have changed, why would you think the AI bull market is over? I think it’s just a healthy valuation adjustment.

If the bull market is not over yet, then wait for the structure to complete. Don’t be scared away by the washout. The real main rally always begins after a period of patience-testing consolidation, and then rises amidst skepticism.