Following the memory chip sector, optical communication technology is now emerging as the next burgeoning frontier for Wall Street's AI investments. Among the top ten gainers in the S&P 500 index this year, three positions are already occupied by the optical communications sector, with related stocks having more than doubled since the beginning of 2026.
Lumentum, Ciena, and Corning have all secured spots among the S&P 500's top ten performers for the year, with their stock prices more than doubling. Notably, Corning's stock experienced a significant surge following its recent announcement of a partnership with NVIDIA. Coherent has also ranked among the strongest performers in the optical communications sector this year. On the memory chip front, stocks like SanDisk and Intel continue to lead the S&P 500's year-to-date gainers list, but the optical communications sector is now closely following.
As this sector heats up, new ETFs specifically tracking the photonics field have emerged. The Corgi Lithography & Semiconductor Photonics ETF, launched by Cboe, officially began trading on May 6 under the ticker EUV. It is viewed by the market as an optical communications counterpart to the DRAM ETF. The fund has now been listed for over a week, maintaining positive returns, although its gains have not yet matched the eye-catching surge seen at the DRAM ETF's launch.
The core logic behind this optical communications rally lies in the evolution of AI computing power expansion. As the initial GPU shortage gradually eases, memory and network communication have emerged as the next bottlenecks constraining the overall efficiency of AI systems. Optical communication technology is seen as the key pathway to solving the communication congestion between GPUs within data centers.
Why Optical Communication Has Become the New Bottleneck for AI Data Centers
Optical communication technology, which uses photons to transmit signals and data at the speed of light, serves as the backbone of the global internet infrastructure and is not a novel concept. However, the large-scale expansion of AI data centers is endowing this mature technology with new strategic importance.
According to reports, Dinesh Tyagi, CEO of WyzeMind—an AI and chip expert with decades of Silicon Valley experience who transitioned to investing after selling his own tech company—points out that the AI boom is evolving from an initial phase centered on computing power shortages to a new stage where memory and network communication are the primary constraints. In this context, the critical value of optical communication technology lies in solving the efficient communication challenges between GPU server racks within data centers.
Tyagi notes that current data centers primarily rely on traditional copper wire interconnects between GPUs, creating what he describes as "traffic jams" within the data communication network, thereby limiting overall computing efficiency.
Compared to traditional copper wires, optical communication technology offers multiple advantages in AI computing scenarios: lower power consumption, reduced thermal pressure, shorter signal latency, and lower overall costs. These characteristics are becoming increasingly indispensable in the construction and operation of hyperscale data centers.
Tyagi indicates that the industry expects significant breakthroughs in optical communication technology within the next two to three years, potentially eliminating the current communication bottlenecks entirely. This technological evolution prospect also forms a key narrative supporting the rapid rise of related stocks.
From DRAM ETF to Photonics ETF: Investment Tools Accelerate to Keep Pace
As the optical communications sector rapidly gains prominence among investors, corresponding capital market products have also emerged. The Corgi Lithography & Semiconductor Photonics ETF, launched by Cboe on May 6, provides investors with a tool specifically for positioning in the photonics sector, positioning itself similarly to the DRAM ETF that gained significant attention during the memory chip frenzy.
Cboe stated in its product introduction: "Light is a core limiting factor in chip manufacturing, data transmission, and precision sensing, with only a handful of companies mastering the key technologies to manipulate it."
The ETF has now been listed for over a week, maintaining positive returns, but its overall performance has been relatively moderate compared to the explosive surge seen at the DRAM ETF's launch.
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