Morgan Stanley: Optical vs CopperHow do you think

Morgan Stanley: Optical vs Copper

How do you think about the optical scale up opportunity in 2027, 2028, 2029, etc, and how does that relates to the Nvidia ecosystem and roadmap?

A: We believe a small scale out adoption next year, with small volumes accounting for 10-15% penetration with scale out. We do think there are some low adoption with CPO until Feynman in 2029. Small, single digit adoption of CPO in 2028 and really scaling in 2029.

You took your TAM to $73B, 4x from a year ago, talk about the drivers of that and how that compares to consensus and buy side out there?

A: Driven by CapEx data points being 2x we were expecting last year, that is one vector of growth. The other is the cluster sizes being discussed are the biggest rivers of scale up network . We have gone from 8 to 72, then from a couple 100s to 1000s in the next couple generations. This acts as a multiplier to scale up multiplier.

Talk about the exposure among Lumentum, Coherent, and Corning. Are there nuances between who is more exposed, less exposed?

A: For CPO within scale out, it is generally positive for Lumentum. Doesn't necessarily changed a whole lot for Corning. With Coherent, they have to balance it out with transceiver business they have. For Lumentum it is the most positive because of the one customer they have on the transceiver side being google and they are not going to be adopting CPO. For CPO within scale up, it is opportunity for all 3. This is where copper gets replaced with fiber and lit up by lasers and optical engines made by Coherent an Lumentum. In terms of overall exposure, Lumentum has a bigger catalyst because of larger AI/DC revenue. It would be incremental for both Coherent and lumentum. Lumentum #1, Coherent or Corning #2.

Tell me about the Corning Glass Bridge announcement that got the stock excited?

A: This is not a new announcement. It was a paper they released in 2025 and a presentation they did that refocused the market on this technology. It is already part of the $10B photonics target the company discussed couple of months ago.

In terms of catalyst for optical space, OCP (Open Compute Project) coming in October has gone popular. What are you expecting to hear from this?

A: We think this will be a catalyst because it provides more exposure into hyperscaler behavior. OCP will give us a chance to see hyperscalers roadmap, it will focus on CPO, NPO adoption and the vendors involved.

Copper is still the story for 2026 and 2027. We have seen this continued enthusiasm for ASICs. How is copper well positioned for this dynamic? Who are the well positioned beneficiaries?

A: Copper life can be extended with use of retimers and better SerDes. Copper has a lot of runway before switching to optics. We will likely see a hybrid environment before going to 100% optics. A large debate in scale up is what fabric and protocol will become dominant other than NVLINK as we get into new XPUs and alternatives to Nvidia GPUs ramping. A big debate here is between UALink and ethernet. Ethernet is dependent on Broadcom's new ASICs ramping in 2H2027 into 2028, we think Broadcom will have opportunity to bundle XPU solutions with networking portfolio and are very well positioned in ethernet. On UALink, this is high optionality for Marvell and Astera Labs. Astera has the scale up switch for Trainium 3, this is a PCIe based solution. We think customers will want to move to UA Link eventually.

You consider Keysight as an agnostic winner in R&D, regardless of the copper vs optical timeline. Explain your thesis and why do you see it pulling ahead?

A: Keysight really ways in multiple ways when it comes to AI. First, it benefits from different types of architectures being discussed which all need to be tested with their equipment in labs. Second, when you move to higher speeds (400g laser vs 200g), it requires more complicated testing. Third, when architectures change frequently, like every 2 years, that boosts their business. The variety of architectures being tested matters.

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