NVIDIA's CPO switches are in full-scale mass production! Is the second wave of the optical communications rally about to begin?

This makes it possible to interconnect clusters of millions of GPU cards without any network bottlenecks!

Spectrum-X is a switch designed by $NVIDIA.US specifically for large data centers. You can think of it as the network channel between computing rack cabinets. Its design co-packages silicon optical engines directly with switching ASICs in the same package, replacing traditional pluggable optical modules.

Optical Communication Industry ETF: $Roundhill Photonics & Optics ETF(LYTE.US), $Tuttle Capital Pure Play Photonics ETF(FOTO.US)

• Use cases: Large-scale AI training and inference clusters / AI factories:
• Problem solved: High-bandwidth, low-latency communication from GPU to GPU
• Partnership: Completion of "gigawatt-scale" (GW-scale) AI infrastructure (1 GW = power consumption scale of a medium-sized city)

It can also be used for inter-rack connections (commonly known as Scale-out networks): Compared to the traditional pluggable optical module solution, it achieves a ~4x reduction in laser count and a ~10x increase in Mean Time Between Interconnections (MTBI).

• NVIDIA's ramp-up of CPO switches = gradual volume growth in optical interconnects, which will be reflected in future quarterly earnings. Optical communications have corrected for nearly a quarter and only recently rebounded. In terms of heat, it lags behind the storage sector, suggesting market expectations may not yet be fully priced in. The combination of mega-cloud vendor earnings reports and open-source AI further validates that returns from "gigawatt-scale" data centers are viable.
• Indium Phosphide (InP), a mandatory material for optical communications, is in short supply. CEO of $Lumentum(LITE.US): The InP shortage is more severe than the memory crisis.

In the Silicon Photonics Era, Who Benefits?

Materials and Wafers (Substrate Layer)
$AXT(AXTI.US) (2nd largest global InP supplier), $Corning(GLW.US) (optical fiber, glass substrates)

Tools (Equipment Layer)
$Lam Research(LRCX.US)$ASML(ASML.US) $Applied Materials(AMAT.US) $Formfactor(FORM.US) $Camtek(CAMT.US)

Lasers/Optical Engines
$Lumentum(LITE.US)
$Coherent Corp.(COHR.US)

$Applied Optoelectronics(AAOI.US), $Credo Tech(CRDO.US), $Marvell Tech(MRVL.US), $POET Tech(POET.US)

Fabs (Listed here are qualified foundries)

$Fabrinet(FN.US)
$Taiwan Semiconductor(TSM.US)
$Tower Semicon(TSEM.US)

Long-haul Optical Connectivity

$Ciena(CIEN.US) $Maxlinear(MXL.US) $Nokia Oyj(NOK.US)

• Optical engines, COUPE packaging ODMs, and CPO-specific connectors belong to the dependency layer of CPO assembly.
• In contrast, InP substrates, epitaxy, MOCVD equipment, and optical fiber materials belong to the layer that will benefit regardless of the outcome.
• Whether pluggable optical modules hold on or CPO penetration increases, light always emerges from InP and travels through glass fiber optics.

Related Leveraged ETFs:

2x Long MRVL: $MRVL 2X Long ETF(MVLL.US)

2x Long COHR: $COHR 2X Long ETF(COHX.US)

2x Long CRDO: $CRDO 2X Long ETF(CRDU.US)

2x Long GLW: $GLW 2X Long ETF(GLWG.US)

2x Long/Short LITE: $LITE 2X Long ETF(LITX.US) $LITE 2X Short ETF(LITZ.US)

2x Long/Short AAOI: $AAOI 2X Long ETF(AAOX.US) $AAOI 2X Short ETF(AAOZ.US)

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