The strategic partnership between NVIDIA and Coherent in the field of optical interconnects is moving from blueprints to construction.
On June 16, NVIDIA founder and CEO Jensen Huang joined Coherent CEO Jim Anderson at a groundbreaking ceremony for a Coherent facility expansion in Sherman, Texas.
The expansion will increase the capacity of what is claimed to be the world's first six-inch indium phosphide (InP) wafer production line, providing critical optical interconnect components for NVIDIA's AI infrastructure. Coherent simultaneously announced it has secured $50 million in CHIPS Act funding to support the facility's construction.
This groundbreaking marks the first major physical milestone following NVIDIA's March announcement of a $2 billion investment in Coherent and a multi-billion-dollar purchase commitment, signifying a deepening of the two companies' roughly two-decade-long partnership. This progress reinforces the central role of optical interconnect technology in AI infrastructure development and provides a clearer timeline for Coherent's capacity expansion.
The Physical Bottleneck of AI Expansion
As AI systems continue to scale, the physical limits of copper cable transmission are becoming a real constraint in data centers.
At the ceremony, Jensen Huang explained that when 576 GPUs operate as a single system across eight racks—as designed for the upcoming NVIDIA Vera Rubin Ultra NVL576—copper cables can no longer handle the signal transmission between racks. As signal rates increase, the effective transmission distance over metal traces shrinks. Forcing a connection across eight racks with copper would require a data center to expend significant power on signal conditioning and retimers, power that could otherwise be used for computation.
While optical solutions incur a one-time electrical-to-optical conversion loss, once converted, distance adds almost no extra cost. At the scale of NVL576, optical interconnects are the most energy-efficient choice.
Jim Anderson distilled this logic into a single statement: "AI runs on compute but scales on connectivity—and Sherman is the manufacturing site for that connective tissue."
Six-Inch InP Wafers: A Technological Lever for Capacity Leap
The facility in Sherman operates what Coherent calls the world's first six-inch indium phosphide (InP) mass production line. This specification holds significant meaning in the compound semiconductor field.
Most global InP production lines are still based on three-inch or four-inch wafers. Since wafer area is proportional to the square of the diameter, upgrading from three to six inches roughly quadruples the usable area. This directly increases the number of devices produced per batch and significantly reduces unit costs. This improvement in yield and cost structure is precisely the supply foundation needed for large-scale AI infrastructure build-out.
At the ceremony, Jensen Huang noted that building the first production line took 50 years, but capacity has quadrupled in the past year alone, which itself is a measure of accelerating compute demand.
The expanded facility will produce InP wafers, which will ultimately be packaged into pluggable optical modules—similar in size to a USB flash drive—that plug directly into the front panel of NVIDIA network switches, transmitting data between data center racks where copper cannot reach. These modules also provide the external laser sources for NVIDIA's Spectrum-X Photonics and Quantum-X Photonics co-packaged optical switches.
Dual Drivers: Public Funding and Private Capital
The expansion is being supported by both public and private funding.
On the public side, Coherent announced $50 million in CHIPS Act funding, in addition to approximately $17 million in earlier support from the Texas CHIPS program and the Sherman Economic Development Corporation. The total CHIPS Act program is valued at approximately $50 billion, aimed at bringing chip manufacturing back to U.S. soil.
On the private capital side, NVIDIA announced in March a $2 billion investment in Coherent to support R&D, future capacity expansion, and U.S.-based manufacturing, accompanied by a multi-billion-dollar purchase commitment for advanced laser and optical networking products. NVIDIA had previously announced plans, through industry partnerships, to build new bases in Arizona and Texas, aiming to produce up to $500 billion worth of AI infrastructure in the United States.
At the ceremony, Jensen Huang stated, "Coherent is a world-class company, and the work you do is essential to our future, to the future of AI, and to the reindustrialization of America."
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