Kaiyuan Securities released a research report indicating that, according to disclosures from Broadcom, Anthropic has signed a new agreement with Alphabet (GOOGL.US) and Broadcom, securing 3.5 GW of next-generation TPU computing power. There is a certain correlation between TPU and Optical Circuit Switch (OCS) deployment, suggesting OCS demand may subsequently increase. Furthermore, according to Cignal AI, the OCS market in 2025 is expected to be dominated by Alphabet, with a total market size of approximately $400 million. By 2029, the OCS market size is projected to exceed $2.5 billion, representing a compound annual growth rate of 58%. This rapid growth is primarily driven by Alphabet's continuously increasing demand for AI computing power. The Google I/O 2026 developer conference could mark the starting point for Alphabet's new technology roadmap, potentially further expanding the incremental demand space for OCS. The main viewpoints from Kaiyuan Securities are as follows:
OCS is likely to become a necessary option, potentially transitioning from experimental deployment to large-scale commercial use. Based on Broadcom's disclosure, Anthropic's new agreement with Alphabet and Broadcom for 3.5 GW of next-generation TPU compute suggests a correlated increase in OCS demand. Optical Circuit Switches (OCS) are switching devices based on all-optical signals. Their working principle involves configuring an optical switching matrix to establish optical paths between any input and output ports for signal switching. OCS eliminates the need for optical-electrical/electrical-optical (O/E/O) conversion, fundamentally avoiding the bandwidth bottlenecks and power consumption issues of traditional electrical switching at high speeds. This significantly reduces signal transmission latency and power consumption, improves hardware lifespan, and lowers system failure probability. Industry research and practical implementation validate that OCS technology can help reduce the overall power consumption of AI computing clusters and data center optical interconnection systems by over 30%.
Currently, there are four primary OCS technology pathways: (1) The MEMS approach achieves optical path deflection by adjusting MEMS micro-mirror units. (2) The liquid crystal approach utilizes the electro-optic effect of liquid crystals cascaded with crystal optical wedges to generate beam deflection. (3) The direct beam deflection/piezoelectric approach uses the electromechanical coupling effect of piezoelectric ceramics to drive collimator displacement and angular tilt. (4) The silicon photonic waveguide approach achieves system interconnection through waveguide splicing. Among these, the MEMS approach, used by Alphabet and Lumentum, has the fastest commercial adoption pace, while the liquid crystal approach is primarily promoted by Coherent. As AI cluster scales continue to expand, OCS is expected to gradually unlock its potential and access a larger market space.
OCS demand is being validated, and the trend towards all-optical switching is becoming clearer. On February 3rd, Lumentum reported its FY2026 Q2 results, stating it is rapidly expanding OCS production capacity to meet "extraordinary customer demand," with a current order backlog exceeding $400 million. Company management specifically highlighted the growth potential of both OCS and Co-Packaged Optics (CPO) businesses. Furthermore, the company anticipates the compound annual growth rate for OCS shipments between 2025 and 2028 will exceed 150%, targeting over $1 billion in annualized revenue by 2027. On February 4th, Coherent reported its FY2026 Q2 results, noting it has over 10 OCS customers, and its order backlog also grew sequentially during the quarter. Company management believes previous estimates for the OCS market size (approximately $2 billion in the coming years) may be too conservative, with the actual figure potentially far exceeding this. On the demand side, Alphabet's self-developed OCS has been deployed at scale across multiple generations of TPU clusters. The company has disclosed that it will require approximately 15,000 units of 300-port OCS switches in 2026, with about 12,000 designed internally and manufactured by Celestica, and the remaining approximately 3,000 procured externally. NVIDIA positions OCS as an "architectural-level solution" for future AI factory networks, demonstrating clear application value and implementation potential in both scale-out and scale-up scenarios.
The upcoming Google Cloud Next developer conference may serve as a catalyst for the Alphabet supply chain. Google Cloud Next '26 is scheduled for April 22-24 in Las Vegas, Nevada, USA. The conference will focus on enterprise AI, cloud innovation, and agentic AI. The next-generation TPU architecture is expected to be unveiled, showcasing the new architecture's OCS ratio and product deployment timeline. The Google I/O 2026 developer conference will be held on May 19-20 in California, with a live stream available globally. This event will focus on showcasing the latest AI breakthroughs and product updates across areas like Gemini and Android. According to Cignal AI, this conference could mark the starting point for Alphabet's new technology roadmap, potentially further opening up incremental demand space for OCS.
Relevant companies in the Alphabet supply chain include: (1) Optical modules & chips: recommended targets include Zhongji Innolight (300308.SZ), Eoptolink (300502.SZ), and Sanan Integrated Circuit (688498.SH); potential beneficiaries include Accelink (300548.SZ). (2) Liquid cooling: recommended target Envicool (002837.SZ). (3) OCS: potential beneficiaries include Tengjing Technology (688195.SH), Focuslight Technologies (688167.SH), Guangku Technology (300620.SZ), and Dexin Li (688205.SH). (4) Server power supplies: recommended target Oulude (300870.SZ). (5) Optical components: potential beneficiaries include Yangtze Optical Fibre and Cable (601869.SH) and T&S Communications (300570.SZ).
Risk factors include slower-than-expected 5G deployment, slower-than-expected AI development, and Sino-US trade friction.
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