AI Infrastructure Boom 🚀💰: Copper & Optics!
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Analysts are observing significant opportunities within data centers, particularly for manufacturers of copper-based and optical components. Mizuho’s Vijay Rakesh predicts robust growth through 2029, anticipating strong demand for active electrical cables, or AECs, due to their cost-effectiveness and reliability in short-reach AI interconnects. Credo Technology is increasing AEC production at major cloud providers, projecting $5 billion to $6 billion in revenue by 2028, five to six times the 2025 level. Simultaneously, the shift toward 1.6T copper cables and co-packaged optics, driven by companies like Lumentum and Coherent, is expected to bolster average sales prices. These developments are fueling investor interest, evidenced by a rise in Coherent’s stock and a surge in Lumentum’s valuation, signaling a potential inflection point for AI networking solutions within data centers.
COPPER CABLES: A DOMINANT FORCE IN NEAR-TERM AI INTERCONNECTS
The burgeoning artificial intelligence landscape is fueling a significant demand for advanced networking infrastructure, particularly within data centers. Analysts are currently divided on the optimal technology – copper-based cables or optical components – to support this growth. However, Mizuho analyst Vijay Rakesh is advocating for a diversified investment strategy, believing both copper and optical technologies possess considerable potential. Rakesh’s assessment centers on the continued relevance of Active Electrical Cables (AECs), a copper-based solution featuring integrated chips for high-speed data transmission between servers, particularly in shorter-reach AI interconnect scenarios. These AECs are favored for their cost-effectiveness and enhanced reliability compared to optical alternatives, a key factor driving their current market dominance. Credo Technology (CRDO) is strategically ramping up AEC production for major cloud providers, and the anticipated transition to Nvidia’s Blackwell and Rubin platforms further solidifies this position. Rakesh projects AEC revenue to reach between $5 billion and $6 billion by 2028, representing a five to six-fold increase from 2025 levels, driven by the potential for 50% higher average sales prices for next-generation 1.6T copper cables.
OPTICAL COMPONENTS: A “INFLECTION AHEAD” FOR LONG-RANGE AI NETWORKING
Despite the current strength of copper-based solutions, Rakesh anticipates a significant shift in the long-term AI networking landscape, predicting a surge in adoption for co-packaged optics (CPO) technology. CPO involves integrating optical transceivers directly within the same package as a processor, such as a GPU, offering key advantages like improved power efficiency, increased bandwidth, and reduced latency – all critical for demanding AI workloads. This technology is particularly beneficial for Lumentum Holdings (LITE), a key supplier of components for CPO, including ultrahigh-powered lasers. Rakesh forecasts optical transceivers to capture the dominant market share for long-reach AI interconnects, capitalizing on the expanding total addressable market, estimated at $22 billion by 2029. This outlook is further supported by positive developments in the broader AI networking market, projected to reach $98 billion, encompassing cables and switches.
MARKET DYNAMICS & INVESTMENT RECOMMENDATIONS
The competitive dynamics within the AI data center cable market are driving substantial growth opportunities for both copper and optical component manufacturers. J.P. Morgan analyst Samik Chatterjee has recently raised his price target for Coherent’s stock (COHR), reflecting a positive inflection point driven by AI-related tailwinds. Chatterjee highlights Coherent’s unique positioning to capture a significant share of the expanding market, encompassing both CPO and optical circuit switching. This bullish outlook has fueled a remarkable rally for Coherent’s stock, up 67% year-to-date, compared to Lumentum’s 143% increase. These diverging performance trends – Credo’s stock declining 17% due to optical concerns, and Coherent and Lumentum experiencing significant gains – underscore the evolving investment landscape within the AI networking sector, highlighting the strategic importance of adapting to the shifting technological priorities.
Our editorial team uses AI tools to aggregate and synthesize global reporting. Data is cross-referenced with public records as of April 2026.