Nvidia’s latest disclosure says Spectrum-X Ethernet Photonics has entered production, easing the market’s earlier concern that co-packaged optics, or CPO, had been broadly delayed. For now, the clearer signal is still in scale-out products, and trading interest has tilted toward lasers, indium phosphide materials and equipment. Whether the move can continue will depend on second-half shipments and whether orders start to appear in financial results.
Nvidia says CPO is in production, but volume delivery is still the key question
According to the update, Nvidia’s Spectrum-X Ethernet Photonics is now in production. The product co-packages optical components with switching silicon and is aimed at lateral connectivity in large AI data centers. Nvidia expects supply in the second half of 2026, with CoreWeave, Lambda and Oracle Cloud Infrastructure listed as the first adopters.
The development helps repair sentiment after worries that CPO had been delayed more broadly. The discussion has shifted from whether the product can be built to when delivery can expand.
That said, entering production does not mean large-scale deployment has arrived early. The more visible signals at this stage are still tied to scale-out and scale-across networks. The scale-up CPO products the market cares more about would need to connect more GPUs across shorter distances, which raises the bar for bandwidth, packaging, thermal performance and reliability. The report says there is still no clear delivery timetable or order visibility there.
In that sense, Nvidia has addressed a near-term expectation issue, but it has not fully closed the debate around the CPO timeline.
LAZR holdings show capital is leaning first into lasers, materials and equipment
The photon and optical communications ETF LAZR was launched on June 30. As of July 31, its main optical communications holdings included:
- Lumentum (LITE) at 14.54%, covering lasers and optical communication components;
- AXT (AXTI) at 10.53%, a supplier of InP substrates;
- Aixtron at 8.45%, which makes MOCVD equipment used in compound semiconductors;
- Applied Optoelectronics (AAOI) at 4.61%, supplying optical interconnect products for data centers;
- Tower Semiconductor (TSEM) at 4.21%, covering silicon photonics and specialty-process foundry services;
- Aehr Test Systems (AEHR) at 4.10%, which provides burn-in and reliability testing equipment.
The portfolio is not a simple bet on traditional optical modules. It is spread across lasers, InP materials, upstream equipment, silicon photonics foundry exposure and testing.
WhiteLine Daily’s explanation is straightforward. If CPO moves into capacity expansion, the earliest changes usually show up in long lead-time equipment, key materials and lasers. Foundry work, testing and full system delivery tend to come later. In other words, capital is trading supply-chain preparation for expansion, not assuming all optical communication names benefit at the same time.
The report also notes that LAZR holds non-optical communication assets including Anthropic, and that its weightings can change. It is better used as a reference for where capital is choosing to position along the chain, not as a definitive list of CPO beneficiaries.
The next check is whether orders and revenue make it into reported numbers
The report points to AXTI and AEHR as the companies showing the most direct fundamental signals right now.
AXT reported second-quarter 2026 revenue of $47.6 million, up from $26.9 million in the prior quarter. GAAP gross margin rose from 29.6% to 44.9%. The company said demand for optical interconnects in data centers pushed InP revenue to a record quarterly high. That suggests materials demand is already flowing into revenue and margins.
For Aehr, the signal is centered on orders. The company posted $60.7 million in new orders in its fourth fiscal quarter, with effective backlog rising to $100.6 million. It also guided for fiscal 2027 revenue of $130 million to $150 million, versus $50 million in fiscal 2026.
Even so, the report says Aehr’s orders also come from AI chips, silicon photonics and power semiconductors, so not all of them can be counted as CPO-related. The next three markers are whether Nvidia can expand shipments in the second half, whether upstream orders continue converting into revenue, and whether the customer list and timeline for scale-up CPO become clearer.
Short-term focus has shifted from a broad sector rebound to supply-chain selection
WhiteLine Daily’s short-term view is that this rebound is mainly repairing an overly pessimistic setup from before. Trading focus has moved away from the entire optical module group and toward lasers, materials and equipment. Nvidia has shown that CPO can enter production, but for the move to shift from expectation repair to earnings-driven trading, shipments, orders and financial statements still need to confirm it.