The trend of &#34;optical advancement&#34; is becoming increasingly clear, with industrial waves triggering new hotspots. NVIDIA announced investments of $2 billion each in photonic technology giants Lumentum and Coherent, securing long-term procurement commitments worth billions of dollars and future capacity rights. This marks another historic move by NVIDIA in the optical interconnect field, following the launch of the world's first mass-produced CPO switch in March last year.A comprehensive understanding of the industry's development progress and future blueprint.<h2>1. What happened? NVIDIA's lavish spending</h2>In March 2026, ahead of the NVIDIA GTC conference, NVIDIA announced investments of $2 billion each in photonic technology giants Lumentum and Coherent, along with securing long-term procurement commitments worth billions of dollars and future capacity rights. This follows NVIDIA's historic move in the optical interconnect field after launching the world's first mass-produced CPO switch in March last year. Undoubtedly, CPO technology will become the core foundation of the next-generation &#34;Gigawatt AI Factory.&#34; Core components such as optical engines, external laser sources, and optical connection units will see a reassessment of their value, with manufacturers that have supply chain positioning advantages likely to benefit first.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/133b9693-736e-4879-b600-3e0850316729.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/133b9693-736e-4879-b600-3e0850316729.png"/>Both transactions are non-exclusive agreements but include procurement commitments in the &#34;billion-dollar&#34; range, as well as priority access to future advanced laser components and optical network products.NVIDIA clearly stated in both announcements: &#34;Optical interconnect and advanced packaging integration are the foundations of next-generation AI infrastructure, as they can provide ultra-high bandwidth and energy-efficient connections for AI factories.&#34;Lumentum and Coherent continue to rise, and optical communication companies in the AH market have collectively surged, with core targets in the CPO industry chain such as Yuanjie Technology, Shijia Photonics, Tianfu Communication, and Taicheng Light receiving high market attention. This reaction reflects the capital market's rapid digestion of NVIDIA's strategic intentions—the competition for AI infrastructure is extending from a simple GPU computing power race to a deep game of high-speed optical interconnect capabilities.To understand NVIDIA's strategic layout, one needs to step back to a more macro industrial perspective.Over the past decade, the growth of GPU computing power has primarily relied on the evolution of chip processes (from 7nm to 2nm). However, entering 2026, the performance gains from merely increasing transistor density are sharply diminishing due to power constraints (Power Wall). NVIDIA's current core strategy has shifted from &#34;selling chips&#34; to &#34;selling factories.&#34; In the visionary &#34;Gigawatt AI Factory&#34; presented at the 2026 GTC conference, thousands of GPUs need to be interconnected as a whole through ultra-high-speed, ultra-low-power networks. At this point, interconnect bandwidth has replaced computing power (TFLOPS) as the primary metric for measuring AI system performanceCPO technology eliminates lengthy copper wire drives by directly packaging the optical engine next to the computing chip, reducing interconnect power consumption by 30%-50% and latency by about 20%. This is precisely why NVIDIA is focusing on Lumentum and Coherent: to control the core components of CPO—the lasers.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/c9871dbb-18ac-4e03-b39d-b038ce994ba9.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/c9871dbb-18ac-4e03-b39d-b038ce994ba9.png"/><h2>II. Why is it important? Is CPO a must-have for the &#34;Gigawatt-level AI factory&#34;?</h2>To understand why NVIDIA is heavily investing in optical interconnects, we must return to the core determining factor of interconnect bandwidth for computing chips—the evolution of SerDes (high-speed serial deserializer) rates.NVIDIA's NVLink SerDes rate has evolved from 56Gbps in the Ampere architecture to 224Gbps in the Blackwell architecture, supporting single-chip interconnect bandwidth from 600GB/s to 1800GB/s. The Rubin era will further evolve to 448G PAM4 and even 896G PAM6. However, behind the rate increase are two major physical bottlenecks that are rapidly deteriorating:First, the signal attenuation bottleneck: Signals above 224G have a Nyquist frequency of up to 56GHz, and if upgraded to 448G, the frequency will soar to 112GHz. In this frequency range, the insertion loss of traditional PCB traces can reach 20-50dB, causing the signal to degrade to an unrecoverable level after just a few inches of transmission.Second, the power wall bottleneck: As SerDes rates iterate towards 448G, the power consumption of DSP will exceed 50%, and the power consumption of SerDes in switching chips will surpass 40%, with a thermal flux density of up to 50W/cm². Traditional air cooling has reached its physical limits. <img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/bea57b4f-7e26-45d8-8dce-3d106fbae4d8.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/bea57b4f-7e26-45d8-8dce-3d106fbae4d8.png"/>Shortening the electrical distance between the optical-electrical conversion point and the switching chip, and reducing or even eliminating the use of high-power DSP, has become the core logic of the evolution of optical interconnect technology.NPO (Near-Package Optics) serves as a transitional solution, deploying the optical engine via LGA connectors on the switchboard, shortening the physical distance to within 150mm, which can reduce power consumption by over 50%.CPO (Co-Packaged Optics) is the ultimate solution, packaging the optical engine and the switching chip together on the same IC substrate or silicon interposer, compressing the electrical connection distance to within 50mm, which can reduce overall system energy consumption by over 65%. According to NVIDIA's technical data, CPO can reduce power consumption per port from 30W to 9W, improving signal integrity by 64 times<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/3148e50b-e2d4-4ccb-9a8a-37185a05d17a.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/3148e50b-e2d4-4ccb-9a8a-37185a05d17a.png"/> NVIDIA Rubin Ultra, as the next-generation AI data center GPU flagship product, achieves a total cabinet bandwidth of 1.5PB/s, provided by 144 GPUs. This groundbreaking bandwidth capability poses unprecedented challenges to Scale-up network architecture.The Rubin Ultra cabinet adopts a dual-layer architecture with 4 Canisters stacked:① First layer: The Canister achieves non-blocking switching through an orthogonal backplane, requiring the use of M9 grade ultra-low loss CCL materials.② Second layer: Inter-Canister interconnection is completed through 72 NVSwitches and 648 3.2T NPO optical engines, with a GPU to optical engine ratio as high as 1:4.5.This means that a single Rubin Ultra cabinet requires nearly 650 3.2T optical engines. When such cabinets are deployed on a large scale in global AI data centers, the demand for optical interconnect components will be astronomical.NVIDIA's optical strategy is divided into three steps. The first step is to launch switches.In 2025, NVIDIA will launch the world's first mass-produced CPO switch—Quantum X800-Q3450, with a total switching bandwidth of up to 115.2T. This device is configured with multiple planes using four Quantum-X800 ASICs, each surrounded by six removable optical subcomponents, with each subcomponent housing three optical engines.NVIDIA plans to launch the Spectrum-X Photonics series CPO switches in the second half of 2026, covering the Ethernet ecosystem and forming a complete technology layout from InfiniBand to Ethernet. <img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/b7a45dfb-098b-4b39-b18b-3475534fa09c.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/b7a45dfb-098b-4b39-b18b-3475534fa09c.png"/>The second step: Locking in core supplier capacity.The investment of $2 billion each in Lumentum and Coherent is an extension of this strategy's second step.Lumentum is one of the world's top CPO optimized laser module suppliers, with emitters capable of producing 1311 nanometer beams and equipped with temperature management mechanisms to optimize network performance. In September last year, Lumentum initiated a capacity expansion plan for CPO components. According to the technical breakdown of the X800-Q3450, this device uses 18 ELS modules as laser sources, with each module containing 8 continuous wave (CW) DFB laser chips. The CPO system requires relatively high-power laser sources (each CW-DFB chip has a power output of about 350mW). Key manufacturers capable of mass production of continuous wave laser units include Lumentum, Coherent, Broadcom, and Furukawa ElectricCoherent's business layout also spans the industrial and data center laser fields, recently launching laser emitters optimized for CPO systems, along with related equipment such as fiber optic cables. Coherent has also maintained a 20-year partnership with NVIDIA.On the surface, the $4 billion direct investment amount is substantial, but the deeper value lies in the &#34;billion-dollar procurement commitments&#34; and &#34;future capacity rights&#34; included in the agreement. This means that NVIDIA not only provides the necessary funding support for the two suppliers to expand production but also locks in the supply share of key components for the coming years with long-term procurement commitments. In a period of generally tight capacity, this combination of &#34;funding + orders&#34; ensures NVIDIA's priority position in the CPO supply chain.Step 3: Build a complete industry chain ecosystemNVIDIA is leveraging its substantial profits to create a powerful ecosystem to support the development of advanced AI systems. Previously, NVIDIA has directly invested in data center company CoreWeave, as well as AI model developers OpenAI and Anthropic.This investment logic is clear: lock in core supplier capacity through capital ties, bind downstream customer demand through strategic investments, and ultimately form a complete closed loop of &#34;chip - network - application.&#34; As the core network link connecting computing power chips and AI applications, CPO naturally becomes a strategic hub in this ecological layout.<h2>III. What to focus on next? The &#34;smile curve&#34; of the CPO industry chain</h2>Based on the disassembly of NVIDIA's CPO switch products, the core links of the CPO industry chain and their value distribution are as follows:<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/1a47b836-28e4-4d73-a8b0-c68453d6fd1e.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/1a47b836-28e4-4d73-a8b0-c68453d6fd1e.png"/>① Lumentum: Technological first mover + capacity expansionLumentum's revenue last quarter was $665.5 million, with a product line that includes traditional pluggable transceivers, optical switches for optimizing AI cluster network traffic, and industrial lasers for applications such as metal welding. In September last year, Lumentum initiated a capacity expansion plan for CPO components. More critically, Lumentum is the sole supplier of laser components for NVIDIA's Quantum X3450 CPO switch.② Coherent: Two decades of partnership + breadth of product lineCoherent has a 20-year partnership with NVIDIA. In addition to laser emitters, Coherent also sells fiber optic cables and is involved in the market for spectral synthesizers and other testing tools, providing engineering development support to network equipment suppliers to simulate different types of optical network traffic.③ Opportunities in the domestic industry chain<ul><li>Fiber optic connection units (FAU): Tianfu Communication may become the main supplier of FAUs for the X800-Q3450 CPO switch, as the company has invested in building an advanced packaging factory in Suzhou, China</li><li>Optical Fiber Switch Box: Taichengguang is an industry leader, collaborating with Corning to serve clients such as Nvidia and Broadcom.</li><li>MT Plug-in: Fokexima (a subsidiary of Shijia Photon) has strong mold design and manufacturing capabilities.</li><li>Optical Chips: Yuanjie Technology is a leading domestic optical chip IDM manufacturer, with CW 70mW laser chip already achieving mass delivery, and CW 100mW laser products having passed customer verification.</li></ul>④ Real Challenges Facing CPODespite Nvidia's heavy investment in CPO, the industry generally believes that the full adoption of optical transmission still faces practical limitations:First, the issue of maintenance costs. CPO integrates the optical engine with the switch chip, and once a failure occurs, the entire device often needs to be replaced, making data center operators cautious about adoption.Second, standardization has not yet been completed. Currently, the relevant standards for optical transmission have not been fully unified, and pluggable optical connectors and modular maintenance mechanisms are still under development.In summary, from a technical perspective, CPO is the necessary path to solve the power consumption and signal integrity bottlenecks brought about by the increase in SerDes rates; from an industrial perspective, locking in the production capacity of core suppliers is the cornerstone of building a &#34;gigawatt-level AI factory&#34; supply chain; from a competitive perspective, optical interconnection capability is becoming a new moat following GPU computing power. For investors, understanding this strategic leap means going beyond a single GPU track and re-evaluating the investment value of AI infrastructure from a &#34;light board copper electricity&#34; full-stack perspective. With the rollout of the Rubin Ultra cabinet and the scaling of CPO switches, core links such as optical engines, laser sources, and optical connection units will usher in a golden window period for value reassessment.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4285b6ad-7f55-4254-b728-624715a64217.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4285b6ad-7f55-4254-b728-624715a64217.jpeg"/>Risk Warning and DisclaimerThe market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investing based on this is at one's own risk

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Nvidia announced an investment of $2 billion each in photonics technology companies Lumentum and Coherent, along with long-term procurement commitments and future capacity rights worth billions of dollars. This marks another significant move by Nvidia in the optical interconnect field, aimed at advancing the development of next-generation artificial intelligence infrastructure. This investment will bring a revaluation of core segments such as optical engines, laser sources, and fiber connections, significantly increasing market attention on related companies

- NVIDIA has invested $2 billion each in photonic technology firms Lumentum and Coherent, securing long-term procurement commitments and future production rights as part of its strategy to enhance optical interconnect technology.  
- This investment follows the launch of the world’s first mass-produced CPO switch, reinforcing NVIDIA's vision for "Gigawatt AI factories," where optical connectivity is crucial for performance improvements.  
- The shift from traditional GPU reliance to high-speed optical interconnects is reshaping competition in AI infrastructure, with significant implications for supply chains and technology standards.

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Nvidia spends lavishly on "light": securing scarce indium phosphide device capacity from Lumentum and Coherent