GrowthTurtle
Data Science PhD & IEEE Fellow, Ex-Two Sigma
MACOM's analog chips sit inside every 800G and 1.6T optical module Nvidia's Rubin needs, so modules cannot ship without it. MACOM is the volume supplier of drivers, TIAs and lasers. Lumentum ships the 200G-per-lane lasers, but MACOM owns share in the driver and TIA beside them, so a Rubin Ultra ramp in H2 2026 scales its optical line without new design wins. At 26x EV/sales and 156x earnings it looks rich, but it alone ships optical, RF and defense analog in volume. x.com x.com x.comÂ
MACOM makes the analog laser-driver chips AI servers need as they swap copper for light and networks jump from 800G to 1.6T. It ships 200G-per-lane EML lasers at volume, and Nvidia's Rubin networking was designed around that part; once designed in, Amazon or Google cannot swap it out mid-build. Tower Semiconductor's $650M plan to triple silicon photonics capacity by mid-2026 is a second-order tell. At 25.6x sales and a 147 P/E there is no room to miss, and a Rubin slip is the risk. x.com x.com x.com x.comÂ
MACOM's product catalogue covers much of the optics area that could benefit from an AI-driven shift in network bottlenecks. Siliconcodesign expects coherent and coherent-lite optics to play a bigger role as AI usage shifts the bottleneck from scale-up bandwidth to data-center networks and internet traffic. This is quite bullish for MACOM longer term. x.comÂ
MACOM is a concentrated photonics pick for terrestrial high-speed optics plus emerging space optical links. Capital was moved into MACOM and Tower Semiconductor after a full exit from Lumentum, as part of rotating toward less obvious, higher-conviction AI bottlenecks while long-term conviction in the AI buildout stays unchanged. x.comÂ
MACOM is priced for perfection after going all-in on the second half. A $100M+ drop in cash went into a big inventory build of finished goods for 800G and 1.6T shipments, so if hyperscaler demand from Meta or Google softens even 5%, it could be left holding expensive specialized chips, and Q3 EPS guidance of $1.31-1.37 is wound tight. The quarter did show real execution: 800G LPO adoption has begun, data center guidance rose to about 40% growth, and its analog moat looks wider than feared. x.comÂ
Rising 1.6T switching demand favors optical suppliers, though their execution risks vary. Bank of America says the market could grow ~101% annually through 2030. Marvell's leading DSPs and Lumentum's supply-short 200G EML lasers are lowest risk; Applied Optoelectronics' capacity expansion and Fabrinet's customer concentration make them medium risk. Aeluma remains pre-commercial, while Lightwave Logic's polymer modulators are a high-risk moonshot despite its TSM partnership. x.comÂ
MACOM is a key optical component supplier for Google's TPUs at a time when Google wants as many TPUs as it can get. The whole supply chain keeps beating quarter after quarter, underpromising and overdelivering on capacity increases, while MACOM is under the radar, underowned and still guiding very conservatively. A high P/E is justified if the market is underestimating future growth, and the stock is setting up to smash; pullbacks are buying opportunities. x.com x.com x.comÂ
MACOM is a hold amid the AI sector sell-off: its investment in IQE de-risks operations a lot, but Coherent and Lumentum are better ways to play the 800G and 1.6T transition. 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
Marvell risks paying a peak-scarcity price for Lumentum if optical supply catches up by 2028-30. The proposed ~$99B deal values Lumentum at roughly 20x guided annualized revenue and 58x estimated after-tax operating income, while Lumentum, Coherent and Chinese suppliers are adding laser capacity. The DSP-and-laser combination has strategic logic, but durable scarcity economics and Nvidia's response remain uncertain. x.comÂ
Optical transceiver demand exceeds supply, and 1.6T lifts revenue per module for suppliers able to qualify capacity. Applied Optoelectronics raised at least $1.62B through 2026 ATMs; its last reported monthly capacity was 200,000 modules versus a year-end target above 650,000. Credo expects over $600M in FY2027 revenue across optical DSPs, PICs and modules, not modules alone. Shipments, yields and margins must prove out. Lumentum and Coherent already price in much expected growth. x.comÂ
Networking is the next AI hardware trade after memory, whose share of rack value rose from 15% to 35%. Optics is moving inside the server, as Nvidia's Feynman architecture builds in co-packaged optics and silicon photonics. Scale-across networking could grow 30% a year just linking existing data centers, as inference moves closer to users and training spreads across sites. Supply is tight: Lumentum's CEO said it can meet only 30% of expected 2027 demand and sees optics tighter than memory. x.comÂ
