The explosive growth of large language models and AI data centers has created a crisis of bandwidth and energy. Traditional copper interconnects cannot move data fast enough or efficiently enough to feed the computational appetite of modern AI. The answer is photonics.
Silicon photonics replaces copper with light, transmitting data at hundreds of gigabits per second over fiber with a fraction of the power consumption. Co-packaged optics (CPO) takes this further, integrating laser transceivers directly onto the switch or processor package, eliminating the pluggable module bottleneck entirely. The result is data center interconnects that are faster, cooler, and more energy efficient — critical when a single AI training cluster can consume as much power as a small city.
Nvidia’s recent $4 billion commitment to Coherent and Lumentum is the clearest signal yet of how central light-based technology has become to the AI buildout. Jensen Huang is not buying optical components because they are nice to have. He is buying supply chain security for the infrastructure that every AI product in the world depends on.
For photonics companies, the AI wave represents a generational opportunity. Demand for advanced lasers, optical transceivers, photonic integrated circuits, and high-speed modulators is accelerating faster than supply chains can respond. The companies that can scale — in yield, in reliability, and in manufacturing volume — will define the next decade of the industry. The energy demands of AI are also accelerating interest in abundant clean power sources — making photonics-driven inertial fusion energy the natural next chapter in this story.
Nvidia invested $2B each in Coherent and Lumentum on March 2, including multi-billion dollar purchase commitments for advanced lasers and silicon photonics, securing AI infrastructure supply chains and validating photonics as central to the next phase of AI data center buildout.
The silicon photonics startup brought total Series A funding to $81M and launched FalconX, the industry’s first fully redundant external laser device emitting eight wavelengths, targeting the multi-terabit-per-second bandwidth demands of hyperscale AI clusters.
European photonics industry body EPIC logged twenty mergers and acquisitions in March, with Jenoptik acquiring FIMA’s Intelligent Transportation Systems business and VIGO Photonics acquiring US-based InfraRed Associates, signaling continued consolidation across the sector.
Canadian laser startup Femtum closed a $16M Series A backed in part by Hamamatsu Ventures, targeting advanced laser solutions for semiconductor manufacturing.
In a historic first, two photonics companies — Lumentum and Coherent — were simultaneously added to the S&P 500 on March 23, 2026, alongside Vertiv and EchoStar. Both had received $2 billion investments from Nvidia earlier that month. Wall Street’s message was unambiguous: photonics is core AI infrastructure.
US private equity firm Apollo Funds acquired Japanese optical glass supplier Nippon Sheet Glass for $3.7B, reflecting growing strategic interest in precision optical materials supply chains.
Applied Optoelectronics launched a 400mW narrow-linewidth DFB laser capable of closing 800G/1.6T power budgets — a critical building block for the industry’s transition to co-packaged optics at scale.
Researchers demonstrated a new laser platform integrating optical components and hundreds of microscopic lasers on a single 1cm chip, paving the way for miniaturized biosensors that could move lab diagnostics from hospitals to homes.
Coherent unveiled a 1.6T-DR8 silicon photonics transceiver module using Marvell’s Ara 3nm optical DSP at OFC 2026, demonstrating rapid industry progress toward next-generation AI data center interconnects.
Researchers designed a sulfur-rich polymer lens material as a potential low-cost replacement for germanium in thermal imaging cameras — a development that could significantly reduce the cost of infrared systems for defense and industrial use.
A review in Nature Photonics assessed PCSELs as the emerging technology of choice for high-power laser applications, with industry actively evaluating them for manufacturing, defense, and medical uses.
SPIE’s 18th annual Prism Awards at Photonics West honored leading new products spanning cameras, sensors, lasers, quantum technology, and extended reality.
The SPIE 2026 Global Industry Report found core optics and photonics component revenues reached $381B in 2024, underpinning a $2.7T photonics-enabled product market with 5,417 companies across 65 countries.
Yole Group forecasts the photonics packaging market will grow from $4.5B today to $14.4B by 2031, driven by AI data center demand for optical transceivers and co-packaged optics.
DataM Intelligence estimates the global photonics market at $666B in 2022 growing at a 5.8% CAGR to exceed $1T by 2031, with AI data centers, telecom, industrial manufacturing, and medical diagnostics as the four primary demand drivers.
EPIC’s monthly tracker recorded 20 photonics transactions in March 2026, with European companies involved in the majority — confirming consolidation is accelerating across the supply chain.
Mordor Intelligence values the silicon photonics market at $3.1B in 2025 growing at 27% CAGR to $10.4B by 2030, driven by hyperscale data center upgrades and rapid LiDAR adoption in automotive.
Laser fusion startup Inertia Enterprises, founded by NIF pioneers Mike Dunne and Annie Kritcher, closed a $450M Series A led by Bessemer Venture Partners to fund a pilot facility built around “Thunderwall” — a laser beamline designed to produce 50 times higher average power than any prior laser of its type and become the foundation of a gigawatt-scale fusion power plant.
“How inappropriate to call this planet Earth, when it is quite clearly Ocean.”
— Arthur C. Clarke
Did you know?
The laser that powered the Apollo missions’ retroreflector experiments is still bouncing photons off mirrors left on the lunar surface in 1969. Scientists fire lasers at the moon from Earth to this day — measuring the distance to within a few millimetres. The moon is getting about 3.8cm further away every year. Photonics has been tracking it the whole time.