Equity Research e] Sector Report | Technology Dec 8, 2025 AI Networking: The Key Move in 2027 to be CPO in NVIDIA's Scale Up Alicia Xia Jeff Pu, CFA Evan Lee aliciaxia@gfgroup.com.hk jeffpu@gfgroup.com.hk evanlee@gfgroup.com.hk What's new Following Google's adoption of OCS optical interconnection, we believe that NVIDIA (NVDA US Buy) may incorporate CPO (rack to rack optical interconnection within Kyber) into the scale-up networking of one version of its 2027 Rubin Ultra architecture. As for NVIDIA's OIO so ...

Core Insights - Nvidia has established a dominant position in the AI chip market, generating $130 billion in revenue last year and experiencing significant stock price gains over the past five years [1] - Concerns have arisen regarding potential competition from rivals, particularly as Nvidia's premium-priced chips may lead customers to consider lower-cost alternatives [2][3] - Nvidia's innovation strategy involves frequent releases of new chip architectures, with the latest being Blackwell, which offers substantial performance improvements over previous models [4][7] Competitive Landscape - Nvidia's biggest competitor may actually be itself, as the introduction of new architectures like Blackwell could cannibalize sales of older models [9][11] - Blackwell generated $11 billion in revenue in its first quarter, indicating strong demand despite the challenge of transitioning customers to newer products [9] - The risk exists that customers may delay upgrading to newer architectures, potentially impacting Nvidia's sales growth [10][11] Customer Dynamics - Major tech companies, such as Meta Platforms, are investing heavily in AI, which supports the likelihood of these customers adopting Nvidia's latest technologies [12] - The presence of competitors, including those developing their own chips, does not significantly threaten Nvidia's market dominance in the high-growth AI sector [13]