NVIDIA Corporation (NVDA.US) Rubin Ultra to ignite optical communications demand? Bernstein: Related market size expected to approach US$47 billion by 2028

In its latest research report published on November 10, Bernstein pointed out that as NVIDIA Corporation (NVDA.US)'s next-generation AI computing platform Rubin Ultra accelerates the adoption of co-packaged optics (CPO) technology, demand for optical communication equipment in AI data centers is expected to see substantial growth. The bank estimates that by 2028, the optical communications market size within NVIDIA Corporation's ecosystem could reach US$46.8 billion, an increase of approximately 91% from US$24.5 billion in 2027. Among this, Rubin Ultra will become an important driver of market expansion. Bernstein analyst Daniel Zhu stated that as AI computing clusters continue to scale up, traditional copper cable interconnects are gradually facing transmission distance and bandwidth limitations, and the application of optical communication technology within data centers is expected to increase significantly. The CPO technology adopted by NVIDIA Corporation on the Rubin Ultra platform will create new growth opportunities for the optical communications industry chain. According to the technical architecture previously disclosed by NVIDIA Corporation, Rubin Ultra will adopt a computing cluster composed of 8 racks, with each rack equipped with 72 GPUs, totaling 576 GPUs. Bernstein estimates that the total optical communication bandwidth of this cluster will reach approximately 15.9 Pb/s, an increase of about 7.7 times compared with approximately 2.1 Pb/s for a comparable-scale configuration on the Vera Rubin platform. This change means that as high-speed interconnects between GPUs gradually shift from copper cables to optical connections, the value of optical components required for a single AI computing cluster will increase significantly. Optical communication equipment manufacturer Coherent (COHR.US) previously disclosed that for chips with data transmission capacity reaching 100 Tbps, the value of their optical components could reach US$15,000. Based on this, Bernstein calculates that the optical component value of a single 8-rack Rubin Ultra cluster could reach approximately US$5.35 million, while the optical component value of a comparable-scale configuration on the previous Vera Rubin platform was approximately US$1 million. Among this, the CPO optical component value of a single Rubin Ultra cluster is approximately US$1.04 million, the pluggable optical component value used for scaling GPU interconnects is approximately US$3.32 million, and the remaining approximately US$1 million comes from other optical connection needs. According to forecasts from Bernstein's semiconductor research team, shipments of the R300 chip related to Rubin Ultra will reach approximately 1 million units in 2027 and further increase to approximately 3.9 million units in 2028. Based on the above shipment volumes and the optical component value per computing cluster, the bank estimates that Rubin Ultra will create approximately US$9.4 billion in optical communications market opportunities in 2027 and further expand to approximately US$36.1 billion in 2028. If NVIDIA Corporation's other AI computing platforms and the future Feynman architecture are included in the calculation, Bernstein estimates that the optical communications market size of NVIDIA Corporation's entire ecosystem will grow from US$19.5 billion in 2026 to US$24.5 billion in 2027 and reach US$46.8 billion in 2028. In addition to optical transceiver equipment, optical fiber suppliers are also expected to benefit. Bernstein pointed out that Corning Inc (GLW.US) previously disclosed that under an architecture using copper cables for intra-GPU scale-up interconnects, each GPU corresponds to demand for approximately 16 optical fibers. However, according to the bank's estimates for the Vera Rubin architecture, actual demand could reach approximately 36 optical fibers per GPU. As Rubin Ultra further adopts optical interconnects, each GPU may require an additional 240 optical fibers, bringing total demand to approximately 276 fibers, equivalent to nearly 8 times that of the Vera Rubin architecture. Although a substantial increase in the number of optical fibers does not mean related revenue will grow proportionally, Bernstein believes it is a reasonable estimate that the value of Corning Inc's optical communications products per GPU will increase by approximately 50%. If optical interconnects are also fully adopted within racks in the future, long-term growth space could expand further. However, there is still uncertainty over whether the optical communications industry chain can meet rapidly growing demand. Bernstein pointed out that indium phosphide substrates may become the main bottleneck limiting the supply of high-end optical communications products. Indium phosphide is an important material for manufacturing high-performance optical communications lasers, and as demand for high-speed optical interconnects in AI data centers surges, related capacity expansion may struggle to keep pace with market growth. According to the bank's estimates, capacity in the indium phosphide substrate industry is expected to grow by approximately 60% in 2027 and further by approximately 67% in 2028. Although major supplier AXT (AXTI.US) is actively expanding production and companies such as Sumitomo also plan to increase capacity, considering that new substrate capacity typically takes 9 to 12 months to shipments to end customers, industry supply tightness may persist until 2028. Bernstein believes that unless overall demand across the AI industry chain slows markedly, prices of key optical communications materials are unlikely to fall significantly. From the perspective of the industry competitive landscape, NVIDIA Corporation is clearly more aggressive than most large cloud computing companies in its adoption timetable for CPO technology. However, other technology giants are also advancing related technologies. The research report noted that Amazon.com, Inc. (AMZN.US)'s AWS is reportedly planning to adopt CPO technology in its Trainium 4 chips in 2027, while Alphabet Inc. Class C (GOOGL.US) has also been reported to be procuring large quantities of new optical interconnect modules for its TPU computing platform. This means that future growth drivers in the optical communications market may not only come from NVIDIA Corporation but will also gradually expand to other large AI computing platforms. Meanwhile, competition from domestic manufacturers is also attracting increasing investor attention. Bernstein pointed out that companies such as Yuanjie Semiconductor Technology are making progress in the field of high-end optical communications lasers and are gradually becoming competitors that international manufacturers cannot ignore. However, the bank believes that Lumentum (LITE.US) and Coherent currently still have technological advantages in the high-end laser field. Although domestic manufacturers may expand share in some low-end product markets, continued growth in demand for high-end optical communications products is still expected to support the business performance of these two companies. In terms of specific investment recommendations, Bernstein maintained its "Outperform" rating and US$350 target price for Coherent, believing it is expected to benefit from growth in AI optical communications demand and may gain more market share during industry consolidation. For Lumentum, the bank also maintained its "Outperform" rating and raised its target price from US$635 to US$700, mainly reflecting the latest stock valuation involved in the Marvell Technology, Inc. (MRVL.US) acquisition transaction. In addition, Bernstein maintained its "Outperform" rating and US$440 target price for Ciena (CIEN.US), believing its cross-data center interconnect business is expected to benefit from increased demand for power and land resources driven by AI computing clusters. For Corning Inc, the bank maintained its "Market Perform" rating and US$120 target price, believing that the market has largely reflected the future growth potential of its optical communications business. Overall, Bernstein remains optimistic about the long-term outlook for the AI optical communications industry chain. The bank believes that Rubin Ultra's adoption of CPO technology will significantly increase demand for optical components in AI computing clusters, while tight supply of key materials may further strengthen the industry's supply-demand dynamics. However, technology deployment progress, supply chain capacity expansion, and changes in industry competition will still be important factors determining the future growth performance of related companies.