Core Viewpoint - Photonics is becoming increasingly essential in accelerating artificial intelligence in data centers, with over 60% of the optical components market now driven by AI data communication [2][37]. Group 1: Market Overview - The global optical components market reached $17 billion last year, historically dominated by the telecom sector, but now significantly influenced by AI-driven data centers [2][4]. - Major suppliers in the optical components market include Coherent and Aisino Technology, each holding a 20% market share, followed by Broadcom with 10% [4]. Group 2: AI and Data Center Growth - Large Language Models (LLMs) are driving exponential growth in AI workloads, necessitating vast XPU clusters and high-bandwidth, low-latency network solutions [5][6]. - Network costs in data centers are projected to rise from 5%-10% of capital expenditures to 15%-20% by 2030 [5]. Group 3: Network Architecture - Two primary types of interconnects in AI data centers are horizontal scaling (fiber links connecting switches across racks) and vertical scaling (electrical links connecting GPUs within racks) [7][10]. - The transition from copper to photonics in vertical scaling networks is ongoing but not yet complete [12]. Group 4: Power and Efficiency - The shift to higher data rates in horizontal scaling networks is leading to increased power consumption, with Nvidia reporting a reduction in power from 30W to 9W when transitioning from pluggable optical modules to Co-Packaged Optics (CPO) [18]. - CPO technology can significantly enhance GPU density, potentially increasing the number of GPUs by up to three times within the same power budget [18]. Group 5: Reliability and Challenges - Reliability is a critical factor in the transition from copper to fiber optics, with a low failure rate essential for handling the vast amounts of data generated in AI data centers [21]. - Nvidia's roadmap indicates that while current solutions use copper, the increasing data rates and signal integrity issues will necessitate a shift to fiber optics [26]. Group 6: Future Outlook - The market for CPO is expected to grow from zero to $5 billion by 2030, with early entrants like Broadcom, Marvell, and Ayar Labs poised to benefit [33]. - By the mid-2030s, all interconnects are anticipated to be optical, utilizing CPO technology [37].