Broadcom, Nvidia among those set to benefit from Co-packaged optics technology: J.P. Morgan

J.P. Morgan highlighted Co-packaged optics technology and the companies set to benefit from it with the advent of AI.

Co-Packaged Optics, or CPO, is an advanced heterogeneous integration of optics and silicon on a single packaged substrate which addresses next-generation challenges of bandwidth, power, and cost.

Analysts led by Samik Chatterjee said CPO has been “a topic of much discussion for many years,with the optical industry flirting with the idea due to the potential benefits, set against steep technical hurdles and limited demand (e.g., existing technology adequate for current applications), which had earlier led to leading experts predicting a lengthy runway before eventual commercialization.”

However, the analysts added that the advent of AI and deployment of related infrastructure has shifted this narrative and has thrusted CPO into the spotlight, mainly with the hurdles of balancing high data rates and power consumption coming to the fore for existing technologies.

Chatterjee and his team expect CPO adoption to be more imminent than initially expected and see greater impetus from a broad group of suppliers in relation to investing in CPO, but at the same time see limited disruption relative to investor fears with a key group of suppliers in the current optical supply chain still playing a key role in CPO.

The analysts see Advantest (OTCPK:ATEYY) (OTCPK:ADTTF), ASMPT (OTCPK:ASMVF) (OTCPK:ASMVY), Broadcom (NASDAQ:AVGO), Coherent (NYSE:COHR), Corning (NYSE:GLW), Fabrinet (NYSE:FN), Lumentum (NASDAQ:LITE), Marvell Technology (NASDAQ:MRVL), Nvidia (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing (NYSE:TSM), United Microelectronics (NYSE:UMC) and Unimicron well positioned to benefit, with Cisco Systems (NASDAQ:CSCO) ramping investments as well.

CPO has notable advantages over traditional connectivity options, including performance andpower consumption, as traditional options approach physical limits, according to the analysts.

The analysts noted that despite these benefits, CPO faces challenges in thermal management, reliability and serviceability. However, the progress related to several of these aspects andincreasing focus on physical limits for traditional solutions is tilting the preference towards CPO.

Chatterjee and his team said industry experts forecast the CPO market to inflect more materially in 2027, reaching over $1B in 2028, and more than $5B by 2030.