Nvidia invests $2B in Coherent to enhance optical bandwidth for AI

Nvidia dropped $2 billion into Coherent Corp. on March 2, buying 7,788,161 shares at $256.80 each through a private placement. The deal comes with a multi-year, non-exclusive strategic partnership focused on optical technologies for AI data centers.

Why optics, and why now

Traditional copper interconnects are hitting physical limits on how much data they can move, how quickly, and how efficiently. Optical interconnects solve this by using laser light to transmit data instead of electrical signals through metal. The result is dramatically higher bandwidth, lower latency, and less energy wasted as heat.

Nvidia’s $2 billion Coherent investment is part of a broader spending spree that includes a matching $2 billion investment in Lumentum and total commitments exceeding $6.5 billion to photonics and optics suppliers since March 2026. The specific focus is on silicon photonics and co-packaged optics, technologies that integrate optical components directly alongside computing chips rather than connecting them through separate modules.

Coherent’s expansion plans

Coherent plans to quadruple production of indium phosphide wafers at its facility in Sherman, Texas. Total investment in the Sherman facility is projected at roughly $650 million, with additional support coming from the CHIPS Act. Groundbreaking for the expansion took place around mid-June 2026.

Coherent reported record third-quarter fiscal year 2026 revenue of $1.81 billion, with its Data Center & Communications segment posting 41% year-over-year growth. Nvidia and Coherent also share a collaborative history spanning roughly 20 years in the photonics space.

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