On March 2, NVIDIA announced a US$2 billion investment in Lumentum Holdings, a leader in optical components. This deal, involving the purchase of convertible preferred stock, constitutes a major change in building advanced AI data centers. The industry is now shifting from copper wiring to faster light-based optical connections.
The news had an immediate impact on the semiconductor and networking industries, causing a strong rally among smaller optical companies that support the internet. Investors saw that the next stage of AI growth would rely on laser technology and silicon photonics. Shares of Applied Optoelectronics rose by 22.4%, and nLight increased by 16.4%. The market now sees light-based technology as key to building large-scale data centers.
A Closer Look at the $2 Billion Photonics Deal
Investment is more than a simple cash infusion; it’s a strategic marriage between the world’s most valuable chip maker and its primary supplier of light. Under the terms of the agreement, NVIDIA purchased 2,876,415 shares of Lumentum Holdings’ newly issued Series A convertible preferred stock at $695.31 per share. A parallel $2B investment matches this $2B layout in Coherent Corp., representing a total $4B bet by NVIDIA on the laser and photonics industry in a single day.
The deal comes at an important time for AI development. In 2025, the industry found that copper cables, once standard for server connections, became too hot and slow for the high data rates needed by 1.6 terabit optical networks. By the end of 2025, leaders realized that scaling AI clusters to millions of GPUs would require moving data using photonics (light) rather than electronics (electricity). NVIDIA’s investment will help Lumentum build a modern US wafer fabrication facility, securing a domestic supply of advanced lasers for co-packaged optics (CPO).
Market participants reacted with imminent fervor. While Lumentum Holdings itself rose nearly 10%, the REIT investors responded quickly to the news. Lumentum Holdings shares rose nearly 10%, and the impact on the rest of the sector was even stronger. The investment shows that NVIDIA is working to control more of the networking process, similar to its approach with the H100 and B200 GPU platforms. By securing supply from Lumentum and Coherent, NVIDIA is making it harder for competitors to get the key parts needed for high-performance AI clusters. Stakeholders call this a supply chain moat that provides the optical transceivers and laser diodes essential for fiber-optic communications. Applied Optoelectronics became the rally’s poster child, gaining 22 million as analysts highlighted its role in producing 800G and 1.60 transceivers that will now be in higher demand. Similarly, nLight saw a 16% boost, powered by expectations that its high-powered semiconductor lasers will be integrated into the next generation of NVIDIA’s NVLink interconnects.
NVIDIA has announced new multi-year agreements with Lumentum Holdings to promote innovation in advanced optics technologies. The partnership will focus on research and development to support the next generation of AI infrastructure and system designs.
The agreement is non-exclusive and includes a multi-billion-dollar purchase commitment from NVIDIA, as well as future access to advanced laser components. NVIDIA is also investing $2 billion in Lumentum to support research and development, expand capacity, and help build a new U.S.-based manufacturing facility.
Optical interconnect technology and package integration are essential for scaling AI factories and making large AI networks more energy efficient and reliable. This partnership combines NVIDIA’s expertise in AI computing and networking with Lumentum’s strengths in optics and manufacturing. The investment will help Lumentum grow its manufacturing and research to support future AI data centers.
AI has reinvented computing and is driving the largest computing infrastructure build-out in history, said Jensen Huang, founder and CEO of NVIDIA, together with Lumentum. NVIDIA is advancing the world’s most sophisticated silicon photonics to build the next generation of gigawatt-scale AI factories.
The multi-year strategic agreement demonstrates our joint commitment toward advancing the optics technologies that will power the next generation of AI infrastructure, said Michael Hurston, CEO of Lumentum. In support of this cooperation, we are also investing in a new fabrication facility to increase capacity and accelerate innovation. We are excited to work together to expand what’s possible for the AI optical architecture of tomorrow.
About Lumentum
Lumentum is a global leader in optical and photonics technologies that support the networks and infrastructure for AI, cloud computing, and next-generation communications. With decades of experience in photonics, Lumentum provides high-performance lasers, modules, and optical sub-systems for expandable, energy-efficient data centers, advanced telecom networks, industrial manufacturing, and sensing. The company is based in San Jose, California, and has R&D, manufacturing, and sales facilities around the world.
Source: NVIDIA Announces Strategic Partnership With Lumentum to Develop State-of-the-Art Optics Technology
The Photonics Pivot: Nvidia Injects $2 Billion into Lumentum to Secure the Future of AI Networking
