1.6T Optical Module Ramp
Richardson Dackam@richardsondx
−22.7%
since Oct 3
The idea
I believe 1.6T optical module demand from AI data centers will outrun supply for the next year or more, confirmed by suppliers themselves warning of shortages into 2027. Since the two largest module makers only trade in China, I built this around the remaining qualified US-listed names, AAOI, Coherent, and Lumentum, at equal weight so no single bet dominates, plus Fabrinet for manufacturing capacity, Credo and Ciena to capture the networking buildout around them.
What it owns
- The US-listed suppliers actually qualified to ship optical modules into the current shortage. · Applied OptoelectronicsIt is newly qualified as a fourth supplier with significant orders, and if volume turns losses into profits the repricing could be sharp, provided demand stays well above capacity and share issuance stays controlled., Coherent CorpAs one of only three US-listed qualified module makers in a shortage, it collects the scarcity premium at scale with stronger pricing power, and needs sustained orders to keep outrunning its production capacity., Lumentum HoldingsIt is adding production capacity fastest in the near term, and the take depends on that capacity arriving into still-unmet demand rather than a market glut.54%
- Component suppliers are paid on every module or interconnect link shipped regardless of which vendor wins market share, hedging vendor-specific risk. · Credo TechnologyIt supplies the signal-processing chip used in every module shipped regardless of vendor, which hedges the risk that any single module maker loses the race., Ciena CorpIt provides optical interconnect systems between data centers and benefits from the same artificial intelligence buildout driving module demand.18%
- Contract manufacturers that assemble modules for multiple vendors get paid on volume shipped, insulating them from competition between module makers. · FabrinetAs the contract manufacturer actually assembling the modules, it gets paid on the ramp whichever module maker wins share, as long as total module volume keeps growing.14%
- Cash14%