GF Securities Managing Director Jeff Pu said in a CPO industry report that Nvidia’s Spectrum-X CPO switch is entering scale-out mass production earlier than the market expected, helped by better yields from key component suppliers. The report highlighted Boruowei (3163), BizLink-KY (3665), and Lumentum (LITE) as supply-chain names that stand to benefit. It also listed Largan Precision (3008) as a bearish call, arguing that CPO enthusiasm has been reflected in the stock too early and too aggressively.
Spectrum-X CPO switch shipment forecast points to a steep ramp
Pu said rising supplier yields have cleared the main obstacles to mass production for the Spectrum-X CPO switch. He projected shipments of about 15,000 units in the fourth quarter of 2026, 16,000 units in the first quarter of 2027, and 30,000 units in the second quarter of 2027, with total 2027 shipments reaching 100,000 units. In his view, that growth curve shows that CPO penetration in the AI training cluster scale-out market is running ahead of what the market had penciled in.
In this context, scale-out refers to Ethernet interconnects between GPU server nodes, handled by Nvidia Spectrum-X switches. The key advantage of CPO is that optical transceivers and the switch ASIC are co-packaged on the same substrate, cutting both power consumption and signal loss. The report framed that architecture as an important step in next-generation high-speed interconnects for AI data centers.
ABMedia also cited an August optics industry report from Rosenblatt that pointed in the same direction. According to that report, order visibility for major companies across the optical supply chain has extended into 2028.
Scale-up optics outlook is revised lower, while Feynman pushes bandwidth higher
While scale-out progress is ahead of schedule, the scale-up track has seen some timing changes. The report lowered its shipment forecast for NVL576 optical engines to about 6.5 million units in 2027 and about 42 million units in 2028, mainly because the T4 system configuration schedule has been pushed back to the first quarter of 2028.
For NVL576, the report said CPO and NPO are still being developed in parallel. The CPO version uses a QM5 module paired with four optical engines, while the NPO version keeps a socketed, more flexible configuration. Even so, the report expects NPO to remain the mainstream choice in this cycle, though work on both paths is continuing.
Looking farther out, the report said the scale-up CPO optical engine being designed for the Feynman generation could reach as high as 6.4 Tbps and support QM6 packaging. That suggests the upgrade cycle for optical bandwidth is still accelerating.
Higher component content underpins the bullish view on suppliers
The central argument behind the positive supplier calls is straightforward: compared with NPO, CPO systems require more component content per system. That raises bill-of-materials value for vendors in the chain.
On that basis, the report named Boruowei and BizLink-KY as direct beneficiaries. It said both companies carry meaningfully higher component value in the CPO switch supply chain because of the higher integration level in CPO architecture versus NPO designs.
Lumentum also received a positive assessment. The report estimated that combined CPO and NPO contributions will rise from 12% of the company’s revenue in 2027 to 26% in 2028. ABMedia added that a previous Rosenblatt report said Lumentum’s OCS, or optical circuit switch, business could double quarter over quarter for several consecutive quarters, with a $2 billion single-quarter revenue target reachable within three to four quarters.
The report also said Semtech’s TIA, or transimpedance amplifier, and driver chips are core ICs in NPO systems. Supply remains tight, which gives pricing some support.
Bearish call on Largan Precision centers on limited earnings contribution
On the negative side, the report singled out Largan Precision. It projected earnings-per-share contribution from CPO-related business at about NT$20 in 2027 and NT$97 in 2028. In the report’s view, that is limited compared with the intensity of the market’s CPO theme trading.
Using 2028 earnings, the report said the stock is trading at about 20 times price-to-earnings, which it did not consider cheap. It also warned that as incumbent suppliers improve yields and more competitors enter the field, Largan may face market-share risk in FA, or fiber array, and FAU, or fiber array unit, products.
ABMedia also noted that UBS had previously cut Largan’s rating from Buy directly to Sell, skipping Neutral, and lowered its target price to NT$5,000. UBS said the CPO opportunity had been priced in too early and too heavily by the market, and added that Largan’s FA/FAU business is still in the early sample-validation stage and would need several quarters of yield improvement before mass production could begin.