Silicon photonics spending accelerates as AI clusters hit copper limits, boosting Coherent and Lumentum
AI Market Summary
AI cluster scaling is increasingly constrained by copper interconnect limits, accelerating capex toward silicon photonics, optical transceivers, and co-packaged optics. The piece highlights deepening NVIDIA collaboration with Coherent and capacity expansion at Lumentum amid strong demand, reinforcing expectations for sustained data-center networking spend. Near term, the narrative supports upbeat sentiment across the AI infrastructure stack, particularly firms enabling higher-bandwidth, lower-power interconnects.
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As AI clusters expand to tens or even hundreds of thousands of processors, traditional copper interconnects are running into physical limits inside data centers. Silicon photonics is increasingly positioned as the upgrade path, with the optical transceiver market projected to jump about 60% in a single year to roughly $26 billion in 2026. Coherent has deepened its silicon photonics partnership with Nvidia, while Lumentum is expanding capacity as demand outpaces supply. Both companies supply key lasers, transceivers and photonic components that stand to benefit from the shift to optical links.
