The optical interconnect market ignites an upstream battle, AMD sweeps up CW lasers.

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AMD is accelerating its layout of the optical interconnect supply chain, seeking to break free from dependence on the NVIDIA ecosystem, which has sparked intense market attention on CW laser-related targets.

According to the latest report from TrendForce, AMD has recently sped up the pace of external laser procurement. The company is reportedly negotiating large-scale purchase agreements for high-power continuous wave (CW) laser chips to ensure future production capacity availability and mitigate supply chain risks associated with being tied to the NVIDIA ecosystem.

Meanwhile, the organization predicts that the market size for co-packaged optics (CPO) and near-packaged optics (NPO) will leap from about $100 million in 2025 to over $39 billion in 2030, with optical interconnect becoming the core battlefield in AI infrastructure competition.

This development has quickly attracted capital market attention. Currently, Lumentum and Coherent’s CW production capacity has been scheduled through 2028, and existing EML contracts make Lumentum’s CW capacity especially tight.

CW Lasers: The Core Bottleneck for AI Accelerator Optical Interconnect

The global CW laser market is currently highly concentrated, with Lumentum holding about 90% market share, and capacity is extremely tight. AMD seeking second and third suppliers is an "inevitable move."

X user @tuolaji2024 analyzed that the core driver for AMD seeking CW laser suppliers is the explosive demand for optical interconnect in its MI series AI accelerator cards—all silicon photonics solutions, including CPO and NPO architectures, require external CW lasers as light sources.

TrendForce’s report further corroborates this assessment. Since 2024, the supply of indium phosphide (InP) substrates has remained tight, making lasers and photodetectors strategic components hotly contested within the industry.

WallstreetCN article mentioned that both Lumentum and Coherent have reported serious shortages in InP capacity, visibility of orders extending to 2028, and LTAs covering the end of the decade.

Large-scale commercialization of CPO still faces multiple challenges such as manufacturing yield, maintainability, fiber connector standardization, and InP laser supply constraints. Scalable CPO switches require integration of large numbers of optical engines, putting significant pressure on overall system-level yield.

NPO and CPO Advance in Parallel, CSPs Accelerate Upstream Resource Acquisition

TrendForce points out that as data transmission speeds evolve from 100Gbps per channel to 200Gbps and even 400Gbps, the limitations of traditional copper interconnects in signal loss, compensation costs, and power consumption are increasingly evident. Bringing optical connections closer to switch ASICs and shortening electrical paths has become a key design priority for next-generation AI data centers.

Regarding deployment paths, NPO is the preferred transitional solution in the near- to mid-term for many cloud service providers (CSPs), as it shortens electrical transmission distances and reduces power consumption while preserving modularity, maintainability, and flexible multi-vendor procurement. Alibaba and Tencent have listed NPO as a mid-term core strategy and are promoting related open standards via the Open Data Center Committee (ODCC); Meta and Microsoft have also prioritized NPO development, building an open optical interconnect ecosystem via OCI-MSA; Amazon employs a multi-vendor strategy and is collaborating with STMicroelectronics on NPO-related efforts.

CPO is more suitable for long-term, high power density, and high integration applications. Within the NVIDIA ecosystem, some small and medium CSPs prefer NVIDIA’s fully integrated AI systems based on CPO, valuing their system integration efficiency and platform consistency.

At the supply chain strategy level, analysis indicates that hyper-scale cloud providers will extend upstream, securing capacity in lasers, epitaxial wafers, and even InP substrates in advance to avoid being "choked" by NVIDIA. In the fiber optic field, Corning has received investment, support for capacity expansion, and long-term purchase commitments from Meta, NVIDIA, and Amazon, and fiber optics are being treated as strategic assets by major CSPs for AI infrastructure.

Market Size and Technical Pathways: Formation of a Multi-architecture Landscape

TrendForce forecasts that the CPO/NPO market will exceed $39 billion by 2030, with growth expected to accelerate significantly between 2028 and 2029 as scalable architectures incorporate optical interconnect technologies. Meanwhile, the pluggable optical transceiver market is projected to remain substantial at around $26 billion in 2030.

The organization stresses that the future of optical interconnect will not be dominated by a single technology; linear pluggable optics (LPO), NPO, CPO, and other architectures will coexist for the long term. The adoption of specific solutions will depend on comprehensive factors such as power efficiency, transmission distance, cost, technology maturity, and supply chain management requirements in various application scenarios.

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