Core Insights - Broadcom is poised to capitalize on the growing demand for co-packaged optics (CPO) in data centers, leveraging its extensive expertise in optical communications acquired through strategic acquisitions [2][3] - The company has made significant advancements in its CPO technology, particularly with the introduction of the Tomahawk series of Ethernet switch ASICs, which promise improved reliability, reduced power consumption, and lower costs [3][5] CPO Technology Development - Broadcom's first-generation "Humboldt" Tomahawk 4 CPO switch chip, launched in January 2021, has a total switching capacity of 25.6 Tbps and features four optical engines providing 12.8 Tbps bandwidth, with power consumption of approximately 6.4 watts per 800 Gb/s port [5] - The second-generation "Bailly" CPO switch ASIC, based on the 51.2 Tbps Tomahawk 5 chip, began shipping in 2023 and has shown a 14.1% reduction in power consumption compared to its predecessor, with 800 Gb/s ports consuming only 5.5 watts [8][9] Reliability and Performance - Meta Platforms has reported successful testing of the Bailly CPO switch, achieving over 1 million device hours without any link jitter, indicating high reliability and performance in real-world applications [13][15] - The average mean time between failures (MTBF) for the optical links in the Bailly CPO system supports the operation of large AI clusters, ensuring that interconnect failures do not become a bottleneck [16][21] Future Innovations - The upcoming "Davisson" TH6 CPO device is expected to further enhance performance, featuring a 102.4 Tbps ASIC with the capability to connect up to 512 ports at 200 Gb/s, significantly improving scalability for AI workloads [9][10] - Davisson's design allows for field-replaceable laser modules, enhancing maintenance and reliability, with power consumption for 800 Gb/s ports reduced to approximately 3.5 watts, a 36.4% decrease compared to the previous generation [10][19] Cost Efficiency - Transitioning from traditional pluggable optical modules to CPO technology can lead to substantial cost savings in power consumption, with estimates suggesting a reduction in operational costs for large-scale deployments [19][23] - The potential savings from adopting CPO technology could cover the costs of additional GPU accelerators, highlighting the financial benefits of improved energy efficiency [19][21]

Core Viewpoint - Broadcom has launched its Tomahawk 6 - Davisson (TH6-Davisson) product, a co-packaged optical (CPO) Ethernet switch that offers an impressive 102.4 Tb/s, marking a significant advancement in next-generation networking [1] Group 1: CPO Technology and Its Advantages - CPO technology addresses the challenges of interconnecting thousands of GPUs in large-scale AI clusters by moving switches to the end of racks, creating a consistent low-latency network structure [2] - Traditional pluggable optical modules have limitations, including significant electrical losses, which can reach approximately 22 dB at 200 Gb/s channels, necessitating complex compensation and increasing power consumption to 30W per port [4] - CPO integrates the optical conversion engine alongside the switch ASIC, reducing electrical loss to 4 dB and power consumption to 9W per port, simplifying optical interconnect implementation [6] Group 2: Performance Metrics and Comparisons - Nvidia claims that by integrating the optical engine directly into the switch chip, its CPO technology improves power efficiency by 3.5 times and signal integrity by 64 times compared to traditional pluggable modules [8] - Broadcom's new TH6-Davisson switch, featuring 16 optical engines, achieves a power reduction of approximately 70% compared to previous models, supporting 800 Gb/s traffic with only 5.5W of power [15][14] Group 3: Industry Impact and Future Developments - The CPO technology is seen as a potential breakthrough in the industry, fundamentally redefining the boundaries of switches and enabling more efficient connections in AI clusters [20] - Broadcom is currently developing its fourth-generation CPO, aiming for a transmission speed of 400G per channel, indicating ongoing advancements in this technology [23] - Nvidia plans to introduce its CPO-based optical interconnect platform for Ethernet and InfiniBand technologies, with significant performance improvements expected for AI clusters [24][25]

Investment Rating - The report gives a "Recommended" rating for the telecommunications industry, considering the sustained high prosperity of the sector driven by AI, 5.5G, and satellite communications [2][5]. Core Insights - The overall market performance for the telecommunications sector shows a weekly increase of 1.58%, while the broader indices experienced declines [2][10]. - The report highlights a significant upward adjustment in the Total Addressable Market (TAM) for data centers by Marvell, from $75 billion to $94 billion, with a compound annual growth rate (CAGR) of approximately 35% from 2023 to 2028 [3]. - The customized computing market is identified as the largest and fastest-growing segment within the data center hardware market, projected to reach $55.4 billion with a CAGR of about 53% [3]. Summary by Sections Market Overview - The telecommunications sector index increased by 1.58% during the week of June 16-20, 2025, while the Shanghai Composite Index fell by 0.51% [10]. - Among the sub-sectors, communication network equipment and devices saw the highest increase of 3.99%, while communication engineering and services experienced the largest decline of 3.58% [13][14]. Stock Performance - Notable stock performances include Chutianlong with a 36.59% increase, followed by Dongxinheping at 29.68%, and Hengbao Co. at 20.99% [15]. Industry News - LightCounting forecasts a 10% quarter-over-quarter growth in optical module sales, driven primarily by 800G Ethernet modules [17]. - YOLE Group reports that the rapid development of AI is driving the widespread adoption of Co-Packaged Optics (CPO), with the market expected to grow from $46 million in 2024 to $8.1 billion by 2030, reflecting a CAGR of 137% [22]. Key Announcements - The report notes significant corporate announcements, including East Mountain Precision's acquisition of Solstice Optoelectronics for up to $629 million to enhance its optical communication business [33].