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Optical circuit switching could become a far larger market if Nvidia adopts it, ending near-total reliance on Google and benefiting Lumentum, Huber+Suhner and Celestica. Per @FundaAI, Nvidia is likely to adopt OCS after late 2028 to connect GPUs across racks, and it backed Spanish OCS startup iPronics. OCS is about $400M today and a few billion next year; Funda suggests it could reach $20B a year by 2030. Open question: how rack-to-rack OCS compares with NPO and CPO. x.comÂ
Optical circuit switching demand is becoming concrete, benefiting Lumentum and Huber+Suhner. Lumentum's largest customer, Google, raised OCS orders after the earnings call, and management cited OCS as a major driver of its new $40 FY2028 EPS target. Huber+Suhner was the big winner after Coherent's OCS orders were likely cancelled and is ramping capacity for Google. OCS is still essentially all Google: Silex has about 10 OCS customers but only one in volume production. x.comÂ
Optical circuit switching could become a $20B-plus annual market by 2030, and Lumentum leads merchant shipments today. Per FundaAI, the top authority on optics, Lumentum expects September-quarter OCS revenue above $100m, which FundaAI sees passing $2.5b next year, as Google's TPU designs add OCS ports and demand widens beyond Google, with NVIDIA expected to adopt OCS from late 2028. Coherent is the other US-listed supplier. x.comÂ
Scale-up moving to optics adds demand for optical suppliers even if new AI architectures need fewer switches. Bigger data centers and more GPUs add to that need; Jensen Huang expects future optics requirements to be several orders of magnitude above what NVIDIA ships today. This challenges the optics bear case for Lumentum, Coherent, Tower Semiconductor and Credo. x.comÂ
Near-packaged optics, the segment Chinese suppliers Innolight, Eoptolink and Accelink serve, is gaining commercial traction faster than consensus expects and could compress co-packaged optics' market. NPO already shows 6.4T bandwidth at the switch while CPO is still validating 1.6T, with better ROI, serviceability and vendor flexibility. Google is testing 6.4T for mid-2027 alongside its NPO-only TPUv9, and Meta and Amazon add demand. Goldman's $91 billion CPO forecast assumes no displacement. … Show more
Bizlink is a beneficiary of Nvidia's faster-than-expected co-packaged optics ramp, because CPO carries higher content for it than near-packaged optics. Spectrum-X CPO switches are in mass production as key component yields improve, with scale-out switch shipments forecast at 15k in 4Q26 and 100k in 2027. Scale-up optical engine estimates were revised to 6.5m in 2027 and 42m in 2028, as NVL576 is intact but Trainium 4 is slower. Full NPO adoption is retained for the cycle. x.com x.comÂ
Coherent's booked InP laser capacity gives it a potential path into Nvidia's CPO expansion. Nvidia wants optical-engine capacity up 15x by mid-2027 and holds laser purchase commitments and capacity rights from its $2B Coherent investment. Coherent says fiscal 2027 is essentially booked and customers are reserving into 2028, but most near-term orders are for pluggables and other products; scale-up CPO revenue starts only in H2 2027. Neither company has sized Nvidia's rights. x.comÂ
Sivers is less exposed to tighter AI financing because its 700M SEK raise funds a buildout largely reliant on external foundries. It is qualifying with Ayar, Jabil, GlobalFoundries and O-Net for potential tier-one hyperscaler pluggable, CPO and NPO deployments. Higher rates may strain neoclouds needing billions for GPUs, but optical content and aggregate demand should still rise even if hyperscaler AI capex falls, especially as new players start qualification. x.comÂ
Pluggable optics have a new scaling path alongside CPO and NPO, supporting demand for light from Lumentum, Coherent and Applied Optoelectronics. Nvidia and Cisco's planned USFP packs 16 full-duplex 400G/lane connections into an OSFP-sized footprint, targeting four times the bandwidth density of 200G/lane modules while retaining replaceability. Volume-production timing and adoption remain unknown. x.com x.comÂ
Optical networking's broader rollout will be slow because scale-up and scale-out require orders of magnitude more connections than today's limited optical distance links. Supply-chain discussions echo that slow pace. NPO/CPO starts in switches and reaches XPUs and GPUs much later, with new challenges. Optical backplanes will be necessary as racks move to optical, though copper will remain in many implementations. x.com x.com x.com x.comÂ
Optics and photonics should be among AI's biggest winners as faster GPU networks need optical connections that suppliers cannot expand quickly enough. Lumentum says some components are sold out through early 2029; Sivers is investing $30M to target more than 100M lasers a year, with operations expected in Q4 2027. Potential US restrictions on Chinese transceivers could reshape supply in 2027. Applied Optoelectronics and Sivers are the favorites. x.com x.comÂ
More lasers per module and new 400G DSPs could keep the pluggable-optics runway open for years, supporting Lumentum, Coherent, Marvell, Applied Optoelectronics and Sivers even as co-packaged optics approaches. NVIDIA and Cisco co-designed a module with four times the bandwidth in the same slot; fewer modules per GPU look bearish, but the added optical content points the other way. x.comÂ
