This week, we move from optics technology to optics companies. We walk the AI optical supply chain from bottom to top. Main debate: Who has a moat? Who is already priced for perfection? *Not investment advice, do your own due diligence*

AXTI - Indium phosphide substrate supplier. Critical bottleneck in the laser stack. Major China export-control risk. Massive stock run vs thin earnings.

Tower Semiconductor - Leading silicon photonics foundry. 5x capacity expansion with customer prepayments. Strong process lock-in. Pure-play optics exposure.

GlobalFoundries - 300mm monolithic photonics platform + Chips Act support. Optics growing fast but still small piece of overall business.

Lumentum - Dominant EML laser supplier. Explosive AI demand. Strong technical moat. Valuation and capex sensitivity are key risks.

Coherent - Vertically integrated from substrate to module. 6-inch InP push could lower costs structurally. Execution and margin mix matter.

Fabrinet - Optics assembly partner. High NVIDIA exposure. Scales with industry, but dependent on upstream supply.

Corning - AI data centers require far more fiber than traditional cloud. $6B Meta deal adds visibility. Timing of scale-up optics is the swing factor.

Timestamps
00:01 Intro
06:59 AXT $AXTI
13:38 Tower Semiconductor $TSEM
23:58 GlobalFoundries $GFS
32:43 Lumentum $LITE
39:38 Coherent $COHR
47:09 Fabrinet $FN
54:07 Corning $GLW

Austin's Substack: https://www.chipstrat.com/

Vik's Substack: https://www.viksnewsletter.com/

Austin and Vik delve into the evolving landscape of optics and networking, particularly in relation to AI and data centers.

The conversation covers various scales of networking, including scale across, scale out, and scale up, while also addressing the demand-supply dynamics in laser manufacturing and the future of optical circuit switches.

The episode highlights the technological advancements and market opportunities in the optics sector, emphasizing the significance of these developments for the future of AI.

Takeaways

• Silicon photonics is becoming crucial for data center connectivity.
• Optics is essential for overcoming copper's limitations in speed and distance.
• Scale across technology is vital for connecting data centers.
• Scale out optics is the standard for connecting GPUs between racks.
• Co-packaged optics can reduce energy consumption in data centers.
• The scale up market for optics is emerging as a new opportunity.
• Indium phosphide wafers are a critical bottleneck in laser manufacturing.
• Optical circuit switches are gaining traction in data centers.
• 2026 is anticipated to be a pivotal year for optical networking.

Chapters

00:00 Introduction to AI and CPU Bottlenecks
03:00 The Rise of Silicon Photonics
06:01 Understanding Optical Networking and Data Centers
08:49 Scale Across: Connecting Data Centers
11:56 Scale Out: Optimizing Data Center Connectivity
14:53 Scale Up: The Future of GPU Connectivity
23:32 The Shift from Copper to Optical Connections
26:13 Challenges and Reliability of Lasers
30:47 Understanding Co-Packaged Optics
34:17 Market Dynamics: Demand and Supply of Lasers
40:46 Emerging Technologies: Optical Circuit Switches

Check out Austin's Substack: https://www.chipstrat.com
Check out Vik's Substack: https://www.viksnewsletter.com

In this episode of the Semi Doped podcast, Austin and Vik delve into the current state of the semiconductor industry, focusing on the memory crisis driven by increasing demand from AI applications. They discuss the implications of rising memory prices, the impact of hyperscaler spending on the market, and the strategic moves of major players like Google, Microsoft, Meta, and Amazon in the AI landscape.

Takeaways

• Memory prices are skyrocketing, impacting consumer electronics.
• The memory crisis is affecting the production of lower-end devices.
• DRAM prices have doubled in a single quarter, creating challenges for manufacturers.
• Nanya Tech's revenue growth indicates a booming memory market.
• AI applications are driving unprecedented demand for memory.
• Hyperscalers are significantly increasing their capital expenditures for AI infrastructure.
• The integration of AI into advertising is reshaping business models for companies like Google and Meta.

Chapters

00:00 The State of Memory in Semiconductors
03:08 Nvidia's GPU Dilemma and Market Dynamics
06:13 The Impact of AI on Memory Demand
09:08 NAND Flash and Context Memory Trends
11:59 The Future of Memory Supply and Demand
15:12 AI Infrastructure and CapEx Spending
17:47 Google's Strategic Investments in AI
20:58 The Advertising Business Model and AI Integration
30:26 Revenue vs. Expenses: A Balancing Act
31:08 The Future of TPUs vs. GPUs in Cloud Computing
35:31 Microsoft vs. Google: AI Investments and Market Reactions
38:22 AI Integration in Enterprises: Microsoft’s Unique Position
39:57 The Power of Microsoft’s Reach in AI
40:30 GitHub: A Hidden Gem for Microsoft’s AI Strategy
43:52 Meta’s AI Strategy: Advertising and Revenue Growth
51:18 Amazon’s Massive CapEx: Implications for the Future
54:00 Looking Ahead: Predictions for 2027 and Beyond

Check out Austin's substack: https://www.chipstrat.com/
Check out Vik's substack: https://www.viksnewsletter.com/