- Over the coming years, CPO is poised to see a dramatic uptick in demand, as data center operators push to expand the limits of AI.
- CPO provides key benefits over the two networking systems that dominate today: copper and optical transceivers. This includes up to 5x power efficiency versus transceivers and much higher bandwidth.
- Nvidia and Broadcom are huge players in CPO, and firms that gain qualification in their supply chains can be massive beneficiaries
Nvidia’s Rapid Networking Roadmap Is a Key Driver for AI Stocks
Within the AI investment theme, there is nowhere that the supply chain shifts faster than in networking, leading companies to gain content on new platforms or lose incremental share.
The reason is straightforward: much of the market is tied to a single customer, Nvidia; and Nvidia is rolling out new architectural iterations at an unusually fast pace. When it comes to networking, two of the most important architectural advancements are the increase in pod and cluster sizes and the transition to 200G per lane.
Last month, Nvidia made $2 billion equity investments in two separate optical component suppliers: Coherent and Lumentum. Nvidia is securing its supply chain as it ramps its co-packaged optics (CPO) roadmap and writing big checks to do so. These targeted moves signal that CPO, the next major architectural shift in AI networking, is moving from theory to reality.
Below, we break down why this transition is taking place and the key companies involved in the secular trend toward CPO.
Nvidia’s Move to Larger Pods: Scale-Up from NVL72 to NVL576 and Beyond
With Blackwell and Blackwell Ultra, Nvidia was fundamentally focused on solving scale-up problems, where the primary challenge is binding large numbers of GPUs into a single coherent node with a unified memory using ultra-dense, low-latency NVLink fabrics. This led to NVL72, which packed 72 GPUs into one rack, acting as one giant GPU.
However, with Rubin and Rubin Ultra, the company is pushing this concept further. Nvidia will offer Rubin in NVL72, NVL144, and NVL576 configurations, connecting two and eight racks respectively into a single NVLink scale-up domain. With NVL576, an eight-rack pod behaves as a single, massively larger GPU.
Rubin also doubles NVLink scale-up bandwidth versus Blackwell — 3.6 TB/s of bidirectional GPU-to-GPU bandwidth on the sixth-generation NVLink 6 interconnect, with 36 switches per NVL72 rack delivering 260 TB/s of total bandwidth versus Blackwell’s 130 TB/s.
As these pods grow in size and require higher bandwidth, copper hits physical limits. Each step up in bandwidth degrades signal integrity faster, shortening the effective length of copper cables. A chart from Marvell illustrates this. At 100G per lane, the speed that now dominates deployments, copper can stretch around 5 meters using range-extending AECs. At 200G, the speed that will be used in Rubin Ultra, the effective length of AECs falls to just 3 meters.
According to Supermicro, one GB300 NVL72 rack is 0.6 meters wide. Rubin Ultra NVL576 will place eight racks side by side, resulting in a width of nearly 5 meters; too long to connect the entire pod at 200G using AECs.
In turn, Nvidia will use CPO for rack-to-rack connections in Rubin Ultra NVL576, although copper will still be used for connections within each rack. This is why Huang said that customers will be able to buy Rubin Ultra in “copper, or copper plus CPO.” Copper plus CPO will be used in NVL576, while only copper will be used in smaller configurations. Huang went on to say, “two years from now, at [NVL]1152, it’s all CPO because there’s a limit to how far it could take copper.”
Co‑Packaged Optics as a Structural Shift for Nvidia’s Stock
With pod sizes and bandwidth only increasing, the transition from copper to optics in scale-up is structural, not cyclical. CPO is positioned as the eventual endpoint of that transition.
Notably, companies in the supply chain are moving to reflect this. Credo recently acquired DustPhotonics to diversify away from AECs, the product the company has built its name on. Through this deal, Credo adds silicon photonics to its portfolio, with the company expecting to generate $500 million in optical revenue in FY2027. For reference, Credo reported its Q3 FY2026 results in March. This will aid the company in bridging the gap between AEC content and optics content.
Marvell acquired Celestial AI as it looks to offer CPO solutions. During its Q4 FY2026 results in March, Marvell projected its CPO revenue reaching a $500 million annualized run rate in Q4 FY2028 before doubling to $1 billion by Q4 FY2029. Nvidia and Marvell also recently announced a strategic partnership, connecting Marvell to Nvidia’s AI factory ecosystem through NVLink Fusion. Customers can easily pair Marvell products, including custom XPUs, certain scale-up networking, and silicon photonics, with Nvidia’s rack-scale AI compute and other components using NVLink. Additionally, Nvidia has invested $2 billion in Marvell.
Scale-Out CPO: Boosting Performance and Efficiency Versus Transceivers
Scale-out networking poses a different challenge for CPO adoption, as companies look to connect larger pods into massive clusters with 1 million AI accelerators. Copper has already been largely phased out of scale-out, as distances are far too long. This has led to optical transceivers becoming a key solution.
Optical transceivers take electrical signals sent through copper traces in ASIC switches and convert them into optical signals. These signals then flow through fiber optic cables, which can stretch kilometers at high bandwidths without losing integrity.
However, using optical transceivers also comes with significant drawbacks. Most notably, they consume much more power than copper and are more expensive. This is the trade-off that data center operators are increasingly having to accept in exchange for longer cable lengths and/or higher bandwidth.
CPO offers something closer to a best-of-both-worlds solution, allowing for both long cable lengths as well as better power efficiency, higher bandwidth, and lower latency compared to transceivers. CPO provides better power efficiency by drastically shortening the distance signals flow through copper before conversion to light.
In most cases, CPO eliminates the need for power-hungry DSPs, which clean up the degraded electrical signal before sending them to transceivers. This comes as CPO embeds optical engines in the same package as the switch. A visual from Nvidia illustrates this difference clearly. The orange line (copper) is much shorter in the CPO diagram, and the DSP is gone, allowing the electrical signal loss to be significantly lower.
CPO also offers higher bandwidth and lower latency versus pluggables. As inference workloads rise, largely driven by agentic AI, improving these variables is key. Automating workflows in enterprise environments means higher data rate requirements compared to the use of chatbots.
LLM developers will compete on how fast their models can execute tasks, making latency reduction paramount. Reducing latency is particularly relevant going forward, as many expect inference to overtake training as the dominant AI workload over the coming years.
McKinsey projects that by 2030, inference will account for 93 GW of data center demand, versus 62 GW for training. It sees inference demand rising by a CAGR of 35% through 2030, significantly faster than training’s 22% CAGR.
In summary, as AI workloads continue expanding, power efficiency, bandwidth, and latency improvements are vital to increasing performance while limiting costs. CPO is a key solution that allows for these advancements.
CPO Adoption: Gated by Low-Cost Copper and Reliability Concerns Near Term
Despite these benefits, CPO faces constraints that limit its adoption today. Copper and optical transceivers are generally sufficient at today’s bandwidth levels and cost less than CPO upfront. With hyperscalers already spending hundreds of billions on AI infrastructure annually, staying on lower-cost solutions makes more sense for now. In line with this, Broadcom CEO Hock Tan said that the industry will “try to scale up within a rack in copper as long as possible.” Echoing this, Jensen Huang said, “We should scale with copper [as far as] we can, as long as we can.”
CPO reliability is another hurdle that developers are tackling. Theoretically, CPO should be more reliable than pluggables, as it consolidates many otherwise separate parts, creating fewer points of failure. However, because CPO has not been deployed at scale, there is a lack of real-world evidence to support this idea.
This is key, as when a CPO chip fails, servicing costs are much higher. Pluggable transceivers can be easily swapped out when they fail, but this is not possible when optical engines are embedded in the switch package. CPO servicing requires removing the full switch to have a complex repair performed or replacing it entirely.
To accelerate adoption, CPO providers must demonstrate strong reliability of the technology. On this front, Broadcom recently made a significant step forward. In a study conducted with Meta, the company showed a 5X improvement in serviceable failures compared to pluggables. The study also found no unserviceable CPO failures after 15 million hours of device testing. This provides solid initial evidence of CPO reliability.
Still, these tests were performed in a lab environment, not in actual data centers. This underscores the need for more CPO reliability testing in real-world environments before adoption hits an inflection point. The industry has an opportunity to generate this data through early CPO deployments in 2026 and 2027, setting the stage for increased adoption thereafter.
Nvidia and Broadcom Are Leading the Push Into CPO Networking
Nvidia and Broadcom are the two market leaders in CPO, as both are leaders in switching ASICs. Nvidia has the largest networking business in the world, with revenue hitting $11 billion. Meanwhile, one-third of Broadcom’s $10.7 billion in total AI revenue, or approximately $3.6 billion, came from networking last quarter.
Broadcom has been developing CPO since 2021 and is now shipping its third-generation scale-out product, the Tomahawk 6 – Davisson switch, which delivers 3.5x better power efficiency than pluggables. Broadcom is currently developing its fourth-generation CPO product, which will double the per-channel bandwidth compared to Davisson.
