$4 billion investment in Lumentum and Coherent, Nvidia "believes in light"

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NVIDIA announced a total investment of $4 billion in two photonics technology companies, elevating its strategic layout for AI data center network architectures to a new height.

On Monday, NVIDIA announced an investment of $2 billion each in Lumentum and Coherent. Both deals include multi-billion-dollar purchasing commitments and future capacity rights for advanced laser components.

After the news was released, the stocks of the two optical giants surged; Lumentum closed up nearly 12%, Coherent rose more than 15%. NVIDIA was up nearly 3% that day.

This investment is aimed at the co-packaged optics (CPO) technology route that NVIDIA is vigorously advancing. CPO integrates pluggable transceivers directly into switches, reducing hardware procurement costs for data center operators and significantly compressing network energy consumption. The two invested companies will use the funds for R&D and U.S. domestic manufacturing capacity expansion.

Strategic Intent: Securing Core Links in the CPO Supply Chain

NVIDIA's move this time is highly consistent with its strategic deployment of introducing CPO technology in its data center switch product line last year. It is reported that in March last year, NVIDIA launched two data center switch series adopting CPO technology, and both Lumentum and Coherent are core suppliers of the necessary laser components for this technology.

In AI cluster architecture, servers are interconnected with optical fiber cables, and switches are responsible for converting between digital data and optical signals. CPO technology integrates transceivers directly into the switches, replacing traditional independent pluggable transceivers, thereby reducing hardware layers and overall power consumption.

NVIDIA founder and CEO Jensen Huang said in a statement: "NVIDIA and Lumentum are working together to advance the world's most advanced silicon photonics technology to build the next-generation gigawatt AI factories." He also stated that NVIDIA will cooperate with Coherent to develop next-generation silicon photonics technology for AI infrastructure.

Two Invested Companies: Photon Technology Players with Different Focuses

Lumentum is one of the world's top suppliers of CPO-optimized laser modules; its transmitter can generate a 1311-nanometer beam and is equipped with a temperature management mechanism to optimize network performance. Last quarter, the company reported $665.5 million in revenue. Its product lines include traditional pluggable transceivers, optical switches for optimizing AI cluster network traffic, and industrial lasers for scenarios such as metal welding. Lumentum began its CPO component capacity expansion plan in September last year.

Coherent's business layout also spans both industrial and data center laser fields. The company recently launched a laser transmitter optimized for CPO systems, complemented by the sales of optical fiber cables and related devices. Additionally, Coherent is involved in the market for spectroscopic synthesizers and other testing tools, providing engineering development support for network equipment vendors to simulate different types of optical network traffic.

According to the agreement, NVIDIA and Lumentum signed a multi-year strategic agreement that includes multi-billion-dollar purchasing commitments and future capacity rights for advanced laser components; the agreement with Coherent builds upon this by also covering future access and capacity rights for advanced laser and optical network products.

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