Cementing its dominance in the artificial intelligence (AI) hardware space, NVIDIA Corp. announced Monday it is investing $2 billion each into Lumentum Holdings Inc. and Coherent Inc.
The $4 billion investment is part of a strategic play to accelerate the development of advanced optics, a technology increasingly viewed as the holy grail for the next generation of AI supercomputing.
The agreements, which sent shares of Lumentum and Coherent climbing 5% and 9% respectively in early trading, include multibillion-dollar purchase commitments and guaranteed future access to laser and optical networking capacity.
Neither company provided specific financial forecasts or equity structures related to the deals, but the message to the market is clear: NVIDIA is using its massive cash reserves to build a physical and technological moat that its competitors will find difficult to cross.
The push into photonics marks a significant evolution in chip architecture. Unlike traditional semiconductors that rely on electrical signals, photonic components use light to transmit data. The transition is essential for gigawatt-scale AI factories, where the sheer volume of data being processed by large language models has begun to hit the physical limits of copper-based electrical wiring.
“AI has reinvented computing and is driving the largest computing infrastructure buildout in history,” NVIDIA CEO Jensen Huang said in a statement. “Together with Lumentum, NVIDIA is advancing the world’s most sophisticated silicon photonics.”
A large slice of the funding is earmarked for domestic growth. Both Lumentum and Coherent will use the capital to bolster research and development and expand manufacturing operations within the U.S. Lumentum CEO Michael Hurlston confirmed the company is already investing in a new fabrication facility to scale capacity for these next-generation optical architectures.
“In support of this collaboration, we are also investing in a new fabrication facility to increase capacity and accelerate innovation,” Hurlston said. “We’re excited to work together to expand what’s possible for the AI optical architectures of tomorrow.”
The move toward localized production aligns with broader industry efforts to insulate advanced technology supply chains from geopolitical volatility.
NVIDIA’s aggressive spending comes as competition for AI supremacy reaches a fever pitch. While NVIDIA remains the market leader, major cloud providers are increasingly developing custom silicon to reduce their reliance on the chip giant. Last week, Meta Platforms Inc. signed a staggering $60 billion deal with AMD Inc., and Marvell Technology Inc. recently acquired photonics startup Celestial AI for $3.25 billion.
By securing capacity access rights, NVIDIA is effectively pre-empting its rivals, ensuring that even as the industry moves toward custom chips, the fundamental optical components required to run them remain under NVIDIA’s influence.
