The pace of artificial intelligence (AI) innovation continues to accelerate, and as it does, the need for faster connectivity is intensifying. This is leading to a shift in the data center away from traditional copper wiring to optical connections that are both faster and more energy-efficient. And rising demand for optical hardware is also creating what could be the next big bottleneck in the AI infrastructure build-out.
Let's look at eight AI stocks you could buy to play the optics trend, starting with chip companies and moving on to companies that provide the physical, campus, and wide-area networking (WAN) layers of optical infrastructure. This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia.
For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » Marvell Technology (NASDAQ: MRVL) is the market leader in optical DSPs (digital signal processors), which serve as the brains inside high-speed optical transceivers. DSPs are the main chips used to take electrical signals from AI chip clusters and convert them into light, thus allowing the data to be transmitted through optical systems.
Nvidia views Marvell's tech as so important to the data center tech stack that it made a $2 billion investment in the company and partnered with it to integrate Marvell's optical networking into its NVLink ecosystem. Broadcom (NASDAQ: AVGO) is another big player in the optical DSP space, and its growth in this business is feeding off its large custom chip business. Lumentum Holdings' (NASDAQ: LITE) laser tech is critical to preventing bandwidth bottlenecks in AI data centers.
The company designs and manufactures high-power indium phosphide (InP) lasers, photodetectors, and optical engines that act as the raw light source for optical transceivers. The company is one of the few global players capable of producing these lasers at scale, giving it a virtual monopoly. Even when its competitors sell complete transceiver modules, they frequently use Lumentum's lasers to power them.
Coherent (NYSE: COHR) and Applied Optoelectronics (NASDAQ: AAOI) both provide critical transceiver infrastructure connecting switches and servers. Coherent is a powerhouse in optical materials, transceivers, and lasers, and its advanced photonics engine technology positions it as an essential partner to cloud providers. Since it is vertically integrated from the raw substrate material to the receivers themselves, the company has been one of the biggest beneficiaries of the shift toward using optical components in data centers.
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