Why Optical Stocks Could Be the Next Big Opportunity in AI

Photonics is becoming a potential high-growth investment theme because AI data centers are running into the bandwidth, latency, heat, and power limits of copper interconnects.

• Optical technology uses photons instead of electrical signals, enabling higher bandwidth while consuming a fraction of the energy required by legacy copper connections.
• Nvidia made several commitments in the first half of 2026, including a $2 billion investment in Coherent, a $2 billion deal with Lumentum, a $2 billion investment in Marvell Technology, and a $500 million equity-linked stake in Corning.
• Nvidia also participated in Ayar Labs’ $500 million Series E round, which valued the company at $3.75 billion; the financing is intended to accelerate production of co-packaged optics.
• Goldman Sachs expects the co-packaged optics market to grow roughly 13-fold and the pluggable optical modules market roughly 10-fold between 2026 and 2028.
• Goldman Sachs projects the AI networking total addressable market to increase from about $15 billion in 2026 to approximately $154 billion in 2028, with co-packaged optics potentially capturing around 60% of it.

Takeaway: Investors can access the theme across materials, optical components, photonic chips, networking hardware, and software, but the article suggests a diversified photonics ETF to reduce stock-specific risk.