Jensen Huang breaks ground in Texas as Coherent optical chip factory begins construction.

``` NVIDIA and Coherent's optical interconnect strategy is moving from paper to the ground. On June 16, NVIDIA founder and CEO Jensen Huang and Coherent CEO Jim Anderson jointly attended the groundbreaking ceremony for Coherent's expansion plant in Sherman, Texas. This expansion will increase the capacity of the world's first 6-inch indium phosphide (InP) wafer mass production line, providing key optical interconnect components for NVIDIA's AI infrastructure. At the same time, Coherent announced it had received a $50 million CHIPS Act subsidy to support the facility's construction. The groundbreaking marks the first substantial milestone since NVIDIA announced a $2 billion investment in Coherent this March, along with multi-billion-dollar procurement commitments. It signifies a deepening of the two parties’ nearly 20-year partnership. This progress reinforces the core role of optical interconnects in AI infrastructure, while also providing a clearer timeline for Coherent’s capacity expansion. Optical Interconnect: The Physical Bottleneck of AI Expansion As AI systems continue to scale, the physical limitations of copper cabling are becoming a real constraint for data centers. At the ceremony, Jensen Huang explained that when 576 GPUs span eight racks and operate as one system—as designed for NVIDIA’s upcoming Vera Rubin Ultra NVL576—copper cables can no longer handle cross-rack signal transmission. As signal rates increase, the effective transmission distance of metal wiring gets shorter. Forcibly connecting eight racks with copper cabling would force the data center to consume a large amount of power on signal conditioning and retimers—power that could otherwise be used for computation. While optical solutions bear a one-time electrical-to-optical conversion loss, once converted, distance almost incurs no extra cost. At the NVL576 scale, optical interconnect is the most energy-efficient option. Jim Anderson summed up the logic in one sentence: "AI runs on computing power, but it scales through connectivity—Sherman is where this connectivity is manufactured." 6-inch InP Wafers: The Technical Leverage Point for Capacity Leap At Sherman, Coherent operates what it claims to be the world's first 6-inch indium phosphide mass production line, a spec of significant importance in the compound semiconductor field. Currently, most InP production lines worldwide are still at the 3-inch or 4-inch wafer stage. Since wafer area is proportional to the square of its diameter, upgrading from 3-inch to 6-inch wafers nearly quadruples the usable area, directly increasing the number of devices produced per batch and significantly diluting unit costs. This improvement in yield and cost structure is precisely the supply foundation needed for large-scale AI construction. At the ceremony, Jensen Huang stated that it took 50 years to build the first production line, but in the past year alone, capacity has quadrupled—this itself is a measure of accelerating computing demand. The expanded plant will produce InP wafers, which will ultimately be packaged into pluggable optical modules—about the size of a USB stick—directly inserted into the front panel of NVIDIA network switches to transfer data between racks in the data center where copper cables can’t reach. These modules will also provide external laser modules for NVIDIA Spectrum-X Photonics and Quantum-X Photonics co-packaged optical switches. Dual-Drive of Policy Funding and Private Capital This expansion has secured financial support from both public and private sources. In public funding, Coherent announced it received a $50 million CHIPS Act subsidy, in addition to $17 million in early support from the Texas CHIPS program and the Sherman Economic Development Corporation. The CHIPS Act has a total scale of about $50 billion, aiming to promote the return of chip manufacturing to the US. In private capital, this March NVIDIA announced a $2 billion investment in Coherent for R&D, future capacity expansion, and US-based manufacturing, along with multi-billion-dollar procurement promises for advanced laser and optical networking products. NVIDIA previously also announced plans, through industry partnerships, to build new bases in Arizona and Texas, aiming to produce up to $500 billion of AI infrastructure in the US. At the ceremony, Jensen Huang stated: "Coherent is a world-class company; what you are doing is vital for our future, for the future of artificial intelligence, and for American reindustrialization." Risk Disclaimer The market has risks, and investment must be cautious. This article does not constitute personal investment advice, nor does it take into account any particular user's special investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investing based on this information is at your own risk. ```