Key Takeaways:
Optical networking, not GPUs, will drive the next phase of AI infrastructure spending, and Lumentum Holdings offers the most direct exposure to that shift.
Artificial intelligence spending is entering a new phase. For the past three years, investors focused almost exclusively on GPUs because they powered every major AI breakthrough. That story is not over, but another bottleneck is emerging: moving data between thousands of processors is becoming just as important as the processors themselves.
Goldman Sachs argues that networking — not computing — is the next major investment cycle in AI infrastructure. "AI clusters are rapidly outgrowing traditional electrical connections," the bank's analysts wrote in an April 2026 optical networking report. "Optical technologies become the biggest beneficiaries because copper connections increasingly struggle with higher bandwidths, longer distances, and rising power consumption."
Goldman projects the overall addressable market for AI networking will grow from roughly $15 billion during the current GB300 cycle to approximately $154 billion by 2028. Networking content per computing unit is expected to expand from about $315,000 in Nvidia's GB300 NVL72 architecture to roughly $9.4 million in the Rubin Ultra NVL576 systems — a nearly 29-fold increase. The bank estimates the market for pluggable optical modules alone could increase about 10-fold, while the broader optical components market expands roughly 13-fold as optics migrate beyond traditional rack-to-rack networking into shorter-reach connections inside AI systems.
For investors, the question is which companies capture that growth. Lumentum Holdings (NASDAQ:LITE) stands out as one of the purest and potentially highest-upside opportunities in the optical networking buildout, but the thesis carries real execution risk around co-packaged optics adoption timelines.
Unlike Nvidia, whose business spans GPUs, networking, software, and complete AI systems, Lumentum is almost entirely leveraged to optical communications. That concentration creates more risk but also more upside. Lumentum already supplies lasers, optical engines, and photonic components used in high-speed data center transceivers. Those products become increasingly valuable as hyperscalers upgrade from 800G networking to 1.6-terabit and eventually 3.2-terabit optical connections.
Goldman expects co-packaged optics to account for roughly $91 billion, or 59%, of total AI networking spending under its base-case 2028 scenario. While widespread CPO adoption still carries execution risk, Lumentum participates in both today's dominant pluggable market and tomorrow's emerging optical engine market. That gives investors exposure regardless of whether the industry moves gradually or rapidly toward CPO.
Compared with diversified semiconductor companies like Broadcom (NASDAQ:AVGO) or Marvell Technology (NASDAQ:MRVL), Lumentum offers much greater sensitivity to rising optical demand because communications hardware accounts for such a large share of its business. If AI networking spending accelerates anywhere near Goldman's projections, Lumentum's revenue growth could outpace that of larger, more diversified peers.
Goldman acknowledges its assumptions are optimistic. The report assumes approximately 29% CPO penetration by Rubin Ultra's rollout, while several independent industry forecasts envision slower adoption extending toward 2030. Manufacturing complexity, packaging yields, serviceability concerns, and hyperscaler qualification timelines could all delay deployment.
There is also the broader AI spending question. Goldman bases its projections on continued aggressive hyperscale investment. If capital expenditures slow or AI infrastructure spending becomes more disciplined, networking demand would likely moderate as well.
That said, the broader trend appears difficult to dismiss. Every major AI roadmap from Nvidia points toward larger clusters, faster interconnects, and greater optical content. Even if CPO adoption slips, Goldman still expects pluggable optics to experience substantial volume growth.
Lumentum shares, which have rallied on the AI optics theme, offer a leveraged bet on a single secular trend. The company's near-total focus on optical communications means its revenue growth could outpace diversified peers if Goldman's $154 billion addressable market projection materializes. But the same concentration means any delay in CPO adoption or moderation in hyperscale capex would hit Lumentum harder than a company like Broadcom, whose semiconductor business spans networking, wireless, and custom AI accelerators. Investors are effectively betting that optical networking's share of AI infrastructure spend expands faster than the market currently prices — a thesis that hinges on Nvidia's roadmap and hyperscaler buildout schedules through 2028.
This article is for informational purposes only and does not constitute investment advice.
