Summary of Key Points
This news article focuses on the "next battleground" for AI infrastructure: The bottleneck in AI development has shifted from computing power to connection technology, with "Co-Packaged Optics (CPO)" becoming an essential requirement. The valuation logic for the communications sector has changed from that of a cyclical asset (fluctuating with data center trends) to that of a core component for long-term growth. The CPO market is poised for significant growth, with potential deployments exceeding 30 million ports by 2030. Related communication ETFs, such as Guotai 515880, have seen substantial gains recently due to their focus on core components like optical modules, making them an efficient tool for investors looking to enter this sector.
Detailed Analysis
1. The "fatal weakness" of AI has changed: From lack of computing power to insufficient connectivity
Previously, the limitation in AI development was considered to be insufficient computing power (e.g., a shortage of GPUs). However, Jensen Huang states that the bottleneck has now shifted to connectivity. This is because AI models have become increasingly large (with trillions of parameters), resulting in an exponential increase in the amount of data that needs to be exchanged between GPUs within clusters. Traditional pluggable optical modules have reached their limits in terms of power consumption, speed, and density—similar to a small pipe that becomes clogged when trying to transport a large volume of water. CPO technology solves this issue by integrating optical modules directly with chips, effectively replacing the small pipes with larger conduits, reducing signal loss and power consumption. Huang also mentions that NVIDIA's switches have already adopted CPO, indicating the technology's readiness for commercial use. The CEO of Mellanox added that their orders for connectivity products have surged, suggesting that these components are no longer just supporting roles but have become central to AI systems.
2. The value of the communications sector has doubled: From a cyclical stock to a growth stock
Previously, optical modules and devices were viewed as ancillary parts of data centers and valued accordingly as cyclical assets. However, with Huang's endorsement, the situation has changed: High-speed connectivity has become a strategic resource on par with GPUs. For example, while data center construction drove demand for optical modules, now they are essential for AI operations, leading to continuous growth in connectivity requirements. Wanlian Securities notes that the demand for AI data centers is shifting towards connectivity components, which will benefit products like optical modules and switches, resulting in a shift in valuation from cyclical fluctuations to long-term growth (similar to GPU companies).
3. The CPO market is about to explode: Over 30 million ports by 2030
Professional firm Cignal AI predicts that CPO has passed the technology validation stage and is ready for widespread commercial use:
- ELSFP market: Expected to exceed $100 million in 2026 and over $1.5 billion by 2030.
- CPO ports: A conservative estimate suggests more than 30 million ports will be deployed annually by 2030, with growth accelerating between 2027 and 2030. This optimism is fueled by NVIDIA and Broadcom's efforts in promoting CPO; NVIDIA is already using it in large-scale applications, and Broadcom plans to launch its own platform. In scenarios where performance enhancement (Scale-up) is a priority, CPO will replace copper cables, opening up new growth opportunities.
4. How can ordinary investors get involved? Communication ETFs are a convenient option
The rapid technological advancement in AI connectivity and the high volatility of individual stocks make it challenging for ordinary investors to make informed choices. In this case, the communication ETF Guotai 515880 is an excellent option:
- High purity of investment: Over 50% of its portfolio is invested in optical modules, with additional exposure to servers and fiber optics, accounting for more than 80% of the total value, directly linking it to the performance of AI systems.
- Large scale and liquidity: The ETF has a market capitalization of 33.7 billion yuan, making it one of the largest in its category, facilitating easy trading for both large and small investors.
- Risk diversification: It allows investors to spread their investments across multiple components, reducing the risk associated with technological changes or company-specific issues.
Recently, this ETF has gained 6% and attracted over 4.5 billion yuan in capital within the past 20 days, indicating that the market is actively investing in this sector.
In one sentence
For AI to advance rapidly, reliable connectivity is essential. CPO represents the new driving force behind connectivity, and the valuation of the communications sector is undergoing a transformation. For ordinary investors looking to benefit from this trend, communication ETFs provide a convenient and low-risk investment option. (Note: Investments carry risks, and decisions should be made with caution.)