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Investing.com -- Shares of optical component companies gained in premarket trading after Nvidia (NASDAQ:NVDA) announced plans to implement co-packaged optics (CPO) in its Spectrum X Ethernet and Quantum X Infiniband platforms.
Nvidia’s shift to CPO aims to reduce power consumption and costs, key concerns in the expanding AI infrastructure market.
In response, Lumentum rose 1.4%, Coherent (NYSE:COHR) gained 1%, and Applied Optoelectronics (NASDAQ:AAOI) climbed 0.8% in premarket trading.
During its GTC 2025 Keynote, Nvidia CEO Jensen Huang highlighted how power constraints are limiting revenue growth for AI data centers, emphasizing the importance of reducing energy consumption per GPU.
The company estimates that traditional transceivers currently consume 180W per GPU, equating to 180 megawatts for a cluster of 1 million GPUs.
B Riley analysts said in a note that the transition to CPO could cut power usage by 40%-60%, improving efficiency.
B Riley noted that Coherent and Lumentum confirmed CPO partnerships with Nvidia, but they also warned of challenges ahead.
“The emergence of CPO will be a major headwind for transceiver companies, including COHR, LITE, Fabrinet (NYSE:FN), and AAOI, since we believe the dollar content shrinkage will be significant, as the industry transitions from transceivers to CPO,” B Riley wrote.
Nvidia’s Quantum Infiniband switch with CPO is set to launch in 2H25, while the Spectrum X Ethernet switch will follow in 2H26.