Optics Inside the Rack
Jerry@jerry_hsiang
−18.2%
since Oct 6
The idea
I believe copper hits its limit inside AI racks and co-packaged optics starts shipping at volume within the next year or two. Rather than chase pluggable transceivers, which lose out once CPO ramps, this take owns the switch-chip leaders driving the shift plus the bottleneck suppliers any CPO design needs: external laser sources, photonics packaging and assembly, and the inspection gear that qualifies them. Positioning is concentrated to match a near-term ramp, with cash held in reserve to add on pullbacks.
What it owns
- These companies ship co-packaged optics switches themselves, so a volume ramp shows up in their revenue first. · BroadcomIt is furthest along in shipping co-packaged optics on its switch silicon, so optics moving inside the rack shows up in its revenue first., NVIDIAIt committed its networking line to photonics-based switches for AI racks, putting the biggest AI buyer behind the copper-to-optics shift., Marvell TechnologyIt makes the optical interconnect silicon that custom AI chips and switches lean on, so it wins the inside-the-rack transition across vendors., Arista NetworksIt turns switch chips into the boxes cloud buyers actually deploy, so volume CPO shows up in its product line and orders.27%
- Fusing optics onto switch chips is a manufacturing problem, and these are the lines that actually do it. · Taiwan SemiconductorIt builds the advanced packaging that bonds optics to switch silicon, so nearly every serious CPO design flows through its lines., FabrinetIt runs the optical assembly lines that turn photonic parts into finished modules, work that gets better paid as optics move inside the rack., CelesticaIt builds networking hardware for hyperscalers, so CPO switch volume lands on its factory floor as those customers move to optics inside the rack., Amkor TechnologyIt supplies advanced packaging capacity outside TSMC, and CPO needs more precise packaging than the industry has ever shipped at volume.22%
- Every CPO switch needs external laser light, and only a few companies can supply it at scale. · CoherentIt supplies both the lasers and optical engines that CPO designs need, so it gets paid on the transition regardless of which switch vendor leads., LumentumIt is one of the few suppliers that can make external laser sources at scale, which is the bottleneck this take leans on hardest., MACOM Technology SolutionsIt makes the photonic chips and laser components that feed CPO designs, a smaller way to own the laser bottleneck as volumes ramp.19%
- Optical parts fail in ways electrical ones don't, so the gear that tests and qualifies them sells into every ramp. · Onto InnovationIt makes the inspection tools that qualify co-packaged optics before they ship, and CPO volume ramps cannot happen without qualification gear first., CamtekIt inspects advanced packages, and optics bonded to silicon create new defect problems that require its tools to catch., NovaIts metrology tools measure the process steps that photonics packaging depends on, so CPO volume pulls its gear into more fabs.12%
- More light in the rack means more fiber and more connectivity silicon around the switch. · Astera LabsIt makes the connectivity silicon that ties AI racks together, and its roadmap moves toward optical links as copper bandwidth limits become binding., CorningIt sells the fiber and optical connectors that multiply when optics move inside the rack, since every CPO port needs fiber routed to it.8%
- Cash12%