CHAPTER 1 | AI Infrastructure Report
GP Bullhound’s view
The AI build-out is accelerating the shift from electrical to optical data movement and pushing silicon photonics deeper into the AI hardware stack. The shift of photonics closer to the switch through co-packaged optics (CPO) is reshaping system architectures and driving investment across the photonics value chain. At the same time, the growing strategic importance of photonics is bringing governments into the market through increased regulation and supply-chain intervention.
The case for silicon photonics
Photonics is the use of light to generate, transmit and process information. Silicon photonics brings these optical capabilities onto silicon chips, using photons instead of electrons to move information with higher bandwidth and lower signal loss than conventional electrical connections. This can reduce latency and power consumption materially, with photonic systems using ~50–80% less power for data transmission tasks than equivalent electronic solutions.
The inflection point: photonics moves into the AI stack
The last couple of years have marked an inflection point for silicon photonics, with the technology becoming increasingly central to the AI hardware stack. The end state is co-packaged optics (CPO), where the optical engine is bonded into the same package as the switch. NVIDIA’s own roadmap illustrates the pace of adoption: its Vera Rubin platform, which arrived in 2026, already introduces a new generation of CPO-enabled switches, before Feynman, in 2028, takes CPO further still by bringing it directly to the NVLink switches that connect GPUs.
At the manufacturing level, fabs are also repositioning themselves for the photonics change. GlobalFoundries’ acquisition of Advanced Micro Foundry in November 2025 was intended to position the company as the world’s largest pure-play silicon photonics foundry by revenue. More recently, Tower Semiconductor announced in July 2026 a major expansion of its 300mm silicon-photonics capacity in Japan. Together, these moves show the commitment to silicon photonics across both product roadmaps and manufacturing capacity.
Photonics enters the geopolitical crosshairs
As photonics becomes increasingly critical, governments are taking a more active regulatory approach. China holds leverage at the picks-and-shovels level, accounting for ~70% of global indium production, a critical input for many photonic lasers. In February 2025, China introduced export licensing requirements, while the US is considering restrictions on Chinese-made optical transceivers, including 800G and 1.6T models for which suppliers such as InnoLight account for much of global supply. Together, these measures show geopolitical pressure extending across the photonics value chain, from strategic materials to finished optical equipment.
Source: PhotonDelta, Company announcements, USGS, Reuters
Silicon Photonics is chapter one of our AI Infrastructure Report, live now. Stay tuned for the full report.
If you’re building in photonics and want to talk, get in touch with our team: brandon.overmeyer@gpbullhound.com evgeny.yakovlev@gpbullhound.com
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