According to a report from Needham Securities, NVIDIA (NVDA) is reportedly advancing a "massive-scale" telecommunications project aimed at building a new, ultra-high-capacity, long-haul transport network. The investment firm estimates the total investment over three years could range between $5 billion and $10 billion, with several companies including Ciena (CIEN) and Cisco Systems (CSCO) positioned to benefit.
Needham analyst Ryan Koontz wrote in a client note, "While we cannot be certain of NVIDIA's strategic intent, we infer the company is attempting to reduce its reliance on the four major hyperscale cloud providers, who currently dominate the global colocation and long-haul interconnect capacity market. NVIDIA could be building its own direct-connect network and colocation services to support its strategic emerging cloud partners and future enterprise clients."
Koontz further noted that in this as-yet-unannounced project, contracts are expected to be awarded to companies such as Ciena, Cisco, Nokia (NOK), Corning (GLW), Zayo, and Lumen Technologies (LUMN).
Koontz's analysis suggests Ciena could see an incremental $500 million to $800 million in sales revenue from the project over the next two to three years, while the gains for Cisco and Nokia would be relatively smaller. Given Ciena's recent stock price pullback, Koontz expressed being "more optimistic" on the shares, stating that "the path to revenue growth is clear as industry supply chains continue to expand." He rates Ciena a "Buy" with a $600 price target.
Beyond Ciena, research data indicates the network system will incorporate "dozens" of fiber links capable of supporting over 5 petabytes of data transfer capacity, with Corning, Ciena, Nokia, Zayo, and Lumen all set to benefit. Corning is anticipated to be the primary fiber supplier for all U.S. deployment projects, while Zayo and Lumen are expected to participate through a Managed Optical Fiber Network model.
NVIDIA has not immediately responded to requests for comment on the report.
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