Updates on Optics and Interconnects
Credo, Marvell and Mitsubishi add to discussion about interconnects and suggest 2027 estimates for the AI complex are too low.
Dear readers,
We are only at mid-week and there has been so much to report on interconnects.
Helpful summary here:
We won’t cover Lite and Cohr below - a bit of a tug of war between TPUs and GPUs that we will not bog you down with.
Instead, we discuss:
Credo
Marvell
Mitsubishi
All helpful for understanding why we like our top optics pick. Credo is also worth a look given the advertised TAM expansions.
Credo
Credo, the purple cable company, is famous for Active Electrical Cables - essentially copper cables which carry signals with the help of a little boost from semiconductors on each end.
Demand from hyperscalers was very strong and Credo reported the strongest quarterly results in its history.
Q2 Revenue was $268M, +272% y/y and +20% q/q.
Non‑GAAP EPS $0.67 vs Street $0.49. Non-GAAP gross margin of 67.7%.
For FY26, management expects >170% y/y revenue growth.
Highlights from earnings call:
AI clusters are no longer measured in tens of thousands of GPUs. They’re now measured in hundreds of thousands and soon millions. The scale, density and complexity of these systems are pushing every aspect of interconnect.
…we’ve really seen an increase in the conversations around what is the total potential wafer demand in the market for next year and the year beyond and the year beyond that. And I do think that if we look at it from a demand standpoint, the market in general is going to kind of quickly get to the point where we’re kind of almost self-regulated by foundry capacity…. I think it’s going to be a more frequent conversation about capacity constraints at a wafer level.
This reads well for WFE demand benefitting the likes of ASML and Applied Materials. We are building more than 107 semiconductor fabs. The market share looks something like this:
Although there is very strong growth for AECs ahead, the company is expanding its TAM by looking to two growth pillars driven by optics: