Amidst overall market turbulence this year, the optical communications sector has bucked the trend and surged ahead, becoming a core leader in the market. Hot capital continues to pile into segments like OCS (Optical Circuit Switches), CPO (Co-Packaged Optics), and fiber optic stocks.

Meanwhile, the aggressive moves by AI giant NVIDIA Corporation(NVDA.US) this year have pushed the sector’s rally to its peak. In just one month, NVIDIA poured a staggering $6 billion into the optical interconnect space: on March 2, it invested $2 billion each in optical giants Lumentum Holdings, Inc.(LITE.US) and Coherent Corp.(COHR.US), followed by another $2 billion investment in Marvell Technology, Inc.(MRVL.US) on March 31. This blockbuster round of investments sends a crystal-clear strategic message: as the buildout of AI computing infrastructure enters a new phase, the core battleground is shifting from “GPU compute” to “networking and optical interconnect.”

Is this a bubble or a new megatrend? Where are valuations? What’s the industry outlook?

Goldman Sachs views optical networking as the next mega trend in AI infrastructure. In its latest report, Optical Networking: The Next Mega Trend in AI Infrastructure, GS systematically analyzes the opportunity, seeing the sector as moving from a supporting role to a central investment theme with transformative upside.

Goldman Sachs Key Insights

• TAM Explosion: The total addressable market (TAM) for optical networking could soar from $15B to $154B, with “scale-up” (intra-rack, super-node interconnect) driving the majority. GS estimates CPO to reach a $91B opportunity by 2028.
• Technical Drivers: Upgrades to 1.6T/3.2T speeds, surging silicon photonics adoption (from 6% in 2024 to 46% by 2028), scaled commercial use of CPO, and disruptive OCS architectures.
• Core Stocks: Nvidia, Marvell, Lumentum, and Coherent are positioned as leading beneficiaries (“top picks” in the Goldman report); TSMC, GlobalFoundries, MACOM, Fabrinet, and Corning also have exposure.
• Valuation & Cycle: While recent gains are outsized, Goldman stresses the rally reflects a foundational secular shift—AI network buildout is at the start of a multi-year growth cycle, not merely thematic speculation.

Core U.S. Stocks by Value Chain

Summary:

With AI infrastructure entering a new phase, optical networking is fast becoming a core strategic battleground—Goldman Sachs forecasts it as the “next mega trend” and has named US-listed leaders such as Nvidia, Marvell, Lumentum, and Coherent as companies with major upside exposure. While the rally has been dramatic, the structural growth drivers and rising AI+network demand suggest the sector’s potential is only just beginning. Investors should focus on companies with genuine technological edges and strong capacity in advanced optical integration to “stand in the light”—not just stand there.

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