Nvidia is committing $4 billion to secure its position in the photonics race, investing equally in two optics companies that develop technology essential for next-generation AI processors. The chip giant announced $2 billion investments each in Lumentum Holdings and Coherent on Monday, aiming to bolster data center chips with light-based technology that can accelerate artificial intelligence workloads.
Shares of both companies surged following the announcement, with Lumentum climbing 8% and Coherent jumping 13% according to CNBC data. The Yahoo Finance report showed slightly different gains, with Lumentum up 5% and Coherent rising 9% in early trading.
The investments include multibillion-dollar purchase commitments from Nvidia along with future capacity and access rights to advanced laser and optical networking products from both companies. According to statements from the companies, the funding will support research and development while expanding U.S. manufacturing capabilities for optics technology critical to AI infrastructure.
Photonics technology uses light rather than electrical signals to create connections between AI chips, emerging as a preferred solution for chipmakers needing higher inference speeds. Lumentum develops optical and photonic technologies that power networks behind AI, cloud computing, and next-generation communications, while Coherent specializes in harnessing light to create components enabling high-performance optical applications.
"Together with Lumentum, NVIDIA is advancing the world's most sophisticated silicon photonics to build the next generation of gigawatt-scale AI factories," said Jensen Huang, founder and CEO of Nvidia, in a statement obtained by CNBC.
This move comes amid competition in the AI hardware sector. Last week, Meta signed a $60 billion deal with rival Advanced Micro Devices according to Yahoo Finance reporting, putting pressure on Nvidia to maintain its performance edge.
Custom-chip maker Marvell Technology acquired semiconductor startup Celestial AI last year in a $3.25 billion deal focused on photonics technology.
Nvidia executives previously stated at earnings conferences that the company would use its large cash reserves to invest across the AI ecosystem and boost model output capabilities. The optics investments follow Nvidia's recent participation in OpenAI's $110 billion funding round earlier this year, where it contributed $30 billion alongside Amazon's $50 billion investment according to The Verge.
Lumentum CEO Michael Hurlston confirmed his company will invest in a new fabrication facility to increase capacity using the Nvidia funding.
