Key Optical Takeaways from Jensen Huang’s Nvidia GTC Keynote - CPO Has Arrived
Link to our Optical Networking Deep Dive and our research disclaimer.
Jensen Huang, CEO of NVDA 0.00%↑, delivered his highly anticipated keynote at GTC yesterday, the world’s largest AI conference, where he emphasized the massive need for AI infrastructure expansion and introduced NVIDIA’s advancements in optical networking.
Here are the three major takeaways relevant to the optical networking industry.
AI Infrastructure Demand is Still in Its Early Stages
Huang stated that the industry is nowhere near having enough AI infrastructure and projected annual data center CapEx to reach $1T by 2030, up from $350B expected to be spent by the top hyperscalers in 2025 as we show below. This signals a continued explosion in AI-driven data center investments, requiring massive upgrades in computing, networking, and optical interconnects.
Source: Oracle, Meta, Microsoft, Google, Amazon, Industrial Tech Stock Analyst
NVIDIA Introduces Their 1st Co-Packaged Optics (CPO) Products
The most impactful announcement related to optical networking from Jensen Huang’s keynote was the introduction of NVIDIA’s first Co-Packaged Optics (CPO) product, a groundbreaking shift in AI networking infrastructure. As we highlighted here, CPO will replace traditional pluggable transceivers with external laser sources (ESLs), which, combined with TSMC-developed optical engines, will drive significant power and cost savings. In this architecture, fiber optic cables will now plug directly into ports on the switch, transferring the signal from the optical engine without requiring a Digital Signal Processor (DSP), eliminating a key cost component that accounts for ~30% of the transceiver BOM.
Specifically, NVIDIA officially unveiled NVIDIA Photonics, a CPO solution leveraging Micro Ring Modulator (MTM) technology, marking the launch of the first 1.6T Silicon Photonics chip. The Spectrum-X Silicon Photonics platform is set to ship in 2H25, followed by Quantum-X in 2H26. By moving optical components inside the switch, CPO is set to disrupt the traditional pluggable transceiver market, which has long been a core revenue driver for Lumentum LITE 0.00%↑, Fabrinet FN 0.00%↑, Coherent COHR 0.00%↑, and Applied Optoelectronics AAOI 0.00%↑. Jensen emphasized that the current transceiver-to-GPU ratio in AI data centers is 6:1, reinforcing the need for higher optical efficiency as AI workloads scale exponentially.
CPO Will Become More Relevant Beyond 1.6T And Expect Pluggables To Remain Critical
While CPO represents a fundamental shift in optical networking, we believe its adoption will become increasingly relevant as bandwidth scales beyond 1.6T to 3.2T and beyond. The efficiency and power savings gained from integrating optical engines directly into switches will become essential at these higher speeds, making CPO a more attractive solution for AI infrastructure. In turn, we do not believe pluggables are disappearing anytime soon. NVIDIA’s Photonics slides prominently featured key optical suppliers Fabrinet, Coherent, and Lumentum as partners, reinforcing that traditional optical component manufacturers will still play a crucial role in AI infrastructure. Additionally, Lumentum announced a partnership with NVIDIA to supply 200G lasers for its new CPO platform, highlighting that even as CPO adoption grows, discrete optical components will remain necessary.
While the near-term impact of CPO on the broader transceiver market is likely limited, its arrival signals a major industry shift, and we expect it to be a growing focus in the optical networking space as bandwidth demands continue to escalate.
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