The Silicon Photonic Shift: Why Co-Packaged Optics (CPO) is the "Plumbing" of the AI Era

Executive Summary

As we enter 2026, the artificial intelligence infrastructure build-out is hitting a physical wall: the "Copper Limit." While GPU performance has skyrocketed, the ability to move data between chips is lagging. This post outlines why Co-Packaged Optics (CPO) is shifting from a science experiment to a necessity for hyperscalers, who the winners will be in 2026, and how the unit economics of the data center are being rewritten.

1. The Perspective: CPO is No Longer Optional for AI Workloads

For the last decade, we relied on pluggable optics (those silver modules you plug into the front of a switch). They were flexible and easy to service. But in the era of trillion-parameter AI models, they are becoming a liability.

The Impact on AI: The primary bottleneck in AI training clusters (e.g., clusters of 100k+ GPUs) is not compute; it is I/O (Input/Output) bandwidth and power consumption.

• The Power Problem: Moving data electronically over copper traces to the edge of a switch consumes too much power—by some estimates, up to 30-40% of a switch's power budget is just for the I/O. CPO moves the optical engine right next to the ASIC (chip), eliminating long copper traces and reducing interconnect power consumption by >50%.

• The Density Problem: AI workloads require massive "scale-up" bandwidth (GPU-to-GPU). You physically cannot fit enough pluggable modules on a 1RU faceplate to support the 102.4T and 200T switches needed for next-gen clusters. CPO is the only way to achieve the required shoreline density.

Expert Take: We are seeing a bifurcation in the market. Standard cloud networking (email, web serving) will stick with pluggables for years. But AI "backend" networks (the fabric connecting GPUs) are aggressively moving to CPO because they simply cannot afford the power penalty of the old way.

2. The 2026 Leaderboard: Who is Positioned to Win?

In 2026, the market is moving from "PowerPoint slides" to "Production Silicon."

• The 800lb Gorilla: Broadcom. Broadcom is forcing the market’s hand. With their Tomahawk series switches and Bailly CPO platform, they are the only player capable of delivering a fully integrated, mass-manufacturable solution today. They are effectively telling hyperscalers: "If you want the fastest switch, you are taking our optics."

• The Ecosystem Builder: Marvell. Marvell is playing the "Android" to Broadcom's "Apple." They are focusing on open standards and merchant silicon, positioning themselves as the flexible alternative for hyperscalers (like Amazon or Google) who want to design their own custom interconnects using Marvell’s DSPs and optical drivers.

• The Strategic Mover: Ciena. Traditionally a telecom/WAN player, Ciena is now a data center player. Their acquisition of Nubis Communications (more on this below) makes them a dangerous dark horse in the short-reach interconnect market.

• The "Chiplet" Enablers: Keep a close eye on TSMC (packaging) and Ayar Labs (optical I/O). As designs move to chiplets, these firms provide the critical glue that makes CPO work.