Written by: Rita

The supply gap for high-end glass fabric is about 40% in 2026 and deepening in 2027. In a report released on September 13, 2026, Morgan Stanley pointed out that the material demand driven by AI infrastructure is reshaping the upstream supply chain for PCBs and MLCCs. High-end glass fabric, HVLP4+ copper foil, and optical fiber are currently the three most scarce materials. Morgan Stanley expects the supply tightness to continue until 2028.

Morgan Stanley analyst Rachel Zhang noted in the report that the AI materials sector rose 91% over the past 12 months, but as of September 10, 2026, it had pulled back about 36% from the peak between May and June. The price-to-earnings ratio for the AI materials sector is about 26 times in 2026, compared to about 35 times for PCB/CCL peers. The firm believes there is room for narrowing the valuation gap.

40% Supply Gap for High-End Glass Fabric

High-end glass fabric is a key reinforcing material for PCB laminates and advanced substrate architectures. Supply is constrained by the availability of Toyota weaving machines, tight supply of high-end yarns, and high technical barriers. The price in the Chinese market has more than doubled since the beginning of the year, with extremely low inventory.

Morgan Stanley estimates that the supply gap will be about 40% in 2026, deepening in 2027, and alleviating to about 30% in 2028. The average price of Japanese glass fabric measured by weight rose from 3,274 yen per kilogram in 2023 to 4,589 yen per kilogram in 2025, an increase of 40%. Sales in 2025 are expected to reach a record slightly above 60 billion yen. The high-performance glass fabric market is expected to grow from about 40 billion yen in 2024 to about 150 billion yen in 2030.

31% Shortage of Copper Foil in 2027

HVLP4+ copper foil is becoming a critical bottleneck in the AI PCB supply chain. Morgan Stanley estimates a supply shortage of about 31% in 2027 and about 20% in 2028. Mitsui Mining and Smelting accounts for 41% of global capacity in 2026 and is a major beneficiary in pricing and sales.

HVLP demand for AI servers is expected to grow by 260% year-on-year in 2026, reaching 24kt, with a further increase of 108% to about 50kt in 2027. The overall operating rate for copper foil in China is expected to reach 93.08% in July 2026, with electronic circuit copper foil at 94.09%, while producers remain cautious about adding capacity.

Optical Fiber Demand Growing Over 20% Annually

AI data center expansion drives demand for optical fiber. Morgan Stanley forecasts a compound annual growth rate of over 20% for AI-driven optical fiber demand from data centers between 2025 and 2030. The usage of optical fiber in hyperscale AI data centers is 5 to 10 times that of traditional data centers, with some estimates suggesting per rack optical fiber use is 5 to 36 times that of traditional data centers.

Optical fiber prices have reached a seven-year high. G.652D optical fiber rose by 75% in January 2026. G.657A single-mode optical fiber increased from 30 yuan per fiber kilometer in mid to late December 2025 to over 50 yuan, with some high-end models exceeding 55 yuan. Multi-mode OM3/4/5 spot prices rose from 200 yuan per kilometer to 300 to 400 yuan. Some single-mode optical fibers have risen by 400% to 650% compared to the end of 2025.

CCL Market to Reach 47 Billion by 2030

Morgan Stanley expects the global CCL market to expand at a compound annual growth rate of about 20% from 2025 to 2030, from about 19 billion dollars to about 47 billion dollars. The CCL market related to AI and data centers is projected to grow from about 4 billion dollars in 2025 to about 30 billion dollars in 2030, with a compound annual growth rate of about 47%, increasing more than seven times.

CCL levels from Ampere/Hopper's M6/M7 to Blackwell's M8 to Rubin's M8.5 and to Feynman's expected M9/M10 reflect the rising electrical and thermal demands of each generation of AI servers. The end-to-end delivery cycle for advanced AI PCBs is about 100 days, compared to about 46 days for traditional multilayer PCBs, representing a 2.2 times difference.

Synthetic Diamonds as a Long-Term Option

The thermal design power of GPUs has risen from approximately 1200W for GB200 to about 2300W for Rubin. Traditional copper-based thermal management solutions have a thermal conductivity of about 400W/(m·K), which is no longer sufficient. Diamond-copper composites have thermal conductivities reaching 600 to 1000W/(m·K), while high-purity CVD diamonds reach 2000 to 2400W/(m·K). NVIDIA's Vera Rubin platform is reported to use diamond-copper composites.

Morgan Stanley believes synthetic diamonds, tungsten, and molybdenum represent longer-term opportunities, depending on technology adoption and material substitution. China is expected to produce about 82% of the world's mined tungsten in 2024, and export licenses will be required starting in February 2025, with Chinese tungsten exports declining by 20.7% year-on-year.

Supply constraints for high-end glass fabric, HVLP4+ copper foil, and optical fiber are unlikely to alleviate in the short term. After the adjustment in the AI materials sector, the valuation gap and material strength enhancement will be focal points for future attention.

Disclaimer

This article is a compilation and interpretation of a third-party brokerage report (Morgan Stanley, September 13, 2026) by潮向研究, combined with the organization of publicly available market information. The ratings, target prices, earnings forecasts, and related judgments cited in the text are the opinions of the brokerage's analysts, representing only their affiliated institution's stance, and do not represent潮向研究's views, nor do they constitute any investment advice.

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