Investors may want to keep an eye on optical networking stocks, including Lumentum (NASDAQ: LITE), Ciena (NYSE: CIEN), and Marvell Technology (NASDAQ: MRVL).
One reason is the growing excitement around Marvell. Jensen Huang, CEO of Nvidia (NASDAQ: NVDA), just said Marvell could be the next potential trillion-dollar company. He highlighted the importance of Marvell’s networking and connectivity chips, which help data centers move information quickly between thousands of connected processors. His comments helped drive a rally in Marvell and other optical networking stocks.
Another reason is that optical networking has become a critical technology for artificial intelligence. Unlike traditional copper cables, optical networks transmit data using pulses of light, allowing for much higher speeds, greater bandwidth, and lower delays. As AI systems grow larger and more complex, the need for faster data transfer continues to increase.
AI Networking Boom Continues
According to Goldman Sachs, networking is becoming the next major area of investment in AI infrastructure. Faster, low-latency data exchange is essential for improving AI computing performance and supporting increasingly powerful models.
The firm estimates that the optical networking market could grow from roughly $15 billion in 2026 to nearly $154 billion by 2028.
In addition, we have to consider that the industry is facing a significant supply-demand imbalance. As artificial intelligence companies build larger computing clusters, they need tens of thousands of GPUs connected through ultra-fast optical links. At that scale, traditional copper cables can no longer deliver the required performance.
To help, Nvidia has reportedly asked suppliers to increase production capacity for indium phosphide lasers by as much as 20 times by 2030. The company has also committed approximately $2 billion to help secure future supply.
As artificial intelligence adoption accelerates, companies that provide the optical networking technology needed to connect massive systems could be positioned for substantial growth.
Early Days for Artificial Intelligence
For one, consider this. There are about 4,000 operational data centers in the U.S. right now. An additional 1,500 to 3,000 are being planned or under construction. According to Pew Research, the South has 754 planned data centers. The Midwest has 419 planned. The West has 277 planned, and the Northeast has about 106 planned.
Two, the artificial intelligence boom is still accelerating.
Forecasts now place the value of artificial intelligence between $1.7 and $3.5 trillion by the early 2030s, with the most aggressive estimates topping $7 trillion by 2035. And judging by the surge in corporate investment, the market is moving toward the high end of those projections.
Three, warnings of an “AI bubble” are increasingly being dismissed by top analysts.
Goldman Sachs says, “it believes the AI story is just getting started – and the investments that seem huge today will be dwarfed by the benefits AI will deliver,” as noted by Quartz.com.
Long term, the investment bank says that artificial intelligence adoption could add $20 trillion to the U.S. economy. AI, according to Goldman Sachs, is already delivering those gains in productivity when deployed right.”
JPMorgan’s Mary Callahan Erdoes added, “AI is presenting opportunities not fully appreciated or understood yet,” as noted by CNBC. “AI itself is not a bubble. That’s a crazy concept… We are on the precipice of a major, major revolution in a way that companies operate.”
“So, if you say to yourself, is AI in a bubble, I feel you have to get very granular on how you’re going to answer that, because in the U.S., we’re starting to gain traction, but we’re nowhere near the ability to have the stuff all to the bottom line.”
For investors, that means the upside potential is still there.
