Nvidia is dipping into its war chest once again this week, investing $2 billion each in Coherent and Lumentum to lock in supply of the vendors' respective silicon photonics technologies.
The $4 billion investment was announced alongside a pair of nonexclusive multibillion-dollar purchase commitments by the GPU slinger to acquire advanced laser components and optical networking products from the two companies.
Both Coherent and Lumentum specialize in optical components, like pluggable transceivers, laser sources, optical circuit switches, and other components used in datacenter optics.
In the wake of the AI boom, Nvidia, which acquired Mellanox in 2020, has emerged as one of the largest networking vendors in the world. Nvidia’s networking business generated more than $31 billion in revenue in its 2026 fiscal year.
While Nvidia has resisted photonics for scale-up NVSwitch fabrics used by its rack-scale compute platforms like the GB200 NVL72, this is largely down to power consumption. According to CEO Jensen Huang, sticking with copper shaved off 20kW of power from the 120kW system.
The same can't be said of the scale-out networks used to stitch multiple systems or racks together for distributed AI inference or training. Here the company has embraced silicon photonics as a means of cutting power consumption.
In 2025, Nvidia unveiled its next-gen Spectrum and Quantum switches would use co-packaged optics, which integrates optical transceivers directly into the switch. This approach dramatically reduces the number of optics required by eliminating pluggable modules on the switch side, which also cuts power consumption.
For the moment, Nvidia is sticking with pluggables on the NIC side of things, and while the optics are now integrated directly into the switch package, its designs still rely on laser modules as their light source.
In addition to scale out, Nvidia also needs optics for products like Spectrum-XGS, which are used to distribute workloads across multiple datacenters together at ranges starting at 500 meters.
Many companies in the space, including Ayar Labs and Lightmatter, believe that as bandwidth continues to increase, chip designers like Nvidia will eventually be forced to embrace silicon photonics interconnects for scale-up networking as well. Such a design would see fiber optic cables connected directly to each accelerator.
In any case, Nvidia's investment in Coherent and Lumentum on Monday highlights just how important these technologies are to the broader AI datacenter supply chain. As part of the announcement, both companies plan to expand their manufacturing capacity in the US.
The deal comes just days after OpenAI announced a $110 billion funding round, of which Nvidia would contribute $30 billion. ®
Source: The register