Photonics ETF Rides AI Data Center Boom to Market as Nvidia Bets Over $6.5 Billion
Alina Collins
Roundhill Investments launches a photonics ETF (ticker LYTE) this week, targeting the shift from copper to light in AI infrastructure; Nvidia has already poured over $6.5 billion into the sector and plans a full optical-interconnect pivot in its 2028 GPU architecture.
What is photonics, and why does it matter now?
Photonics centers on optical interconnects — transmitting data as pulses of light through fiber, replacing electrical signals in copper wire. This means → faster speeds, lower power draw, and far longer transmission range.
In plain terms = copper is the old pipe; fiber is the highway. At AI-scale data loads, copper physically cannot keep up.
The sector is surging because AI data-center bandwidth demand is hitting copper's physical ceiling — photonics is seen as the key path through that bottleneck.
Why has Nvidia committed over $6.5 billion?
Since March, Nvidia has invested at least $6.5 billion in photonics companies, taking stakes in Coherent and Lumentum and putting $2 billion into Marvell Technology.
CEO Jensen Huang positions photonics as the core technology for "next-generation gigawatt-scale AI factories." This means → Nvidia believes connecting over 1,000 GPUs in a single cluster cannot be done on copper alone.
Nvidia plans to ship "Feynman," a new GPU micro-architecture, in 2028. Feynman will fully replace copper with optical interconnects, targeting system bandwidth more than four times current levels.
How big is the market, and how fast is it growing?
Goldman Sachs projects the global addressable market for optical networking will rise from roughly $15 billion in 2026 to about $154 billion by 2028 — a more-than-ninefold expansion in two years.
This reflects a rapidly forming consensus that AI infrastructure must shift from copper to light, with capital front-running the transition.
Lumentum shares are up over 100% year-to-date — the most direct price signal of this expectation cycle.
Two ETFs are racing to market — how do investors choose?
Roundhill launches its photonics ETF (ticker LYTE) this Thursday; its storage ETF (ticker DRAM) has already drawn tens of billions of dollars this year.
Roundhill is not first: Tema ETFs listed a photonics ETF (ticker LAZR) on June 30.
In plain terms = the thesis is the same, but holdings weightings and stock-selection scope may differ — investors need to compare each ETF's constituents and fee structure.
Where is the core risk?
Tema partner Hong Yi Chen wrote at LAZR's launch that by the time Feynman ships, copper may already be unable to meet the required bandwidth, distance, and power-efficiency specs. This means → photonics is framed not as an optional upgrade but as a mandatory switch.
The key word, however, is 2028 — nearly three years out, with meaningful uncertainty in both the technology roadmap and the supply chain.
This reflects the central redemption point for this wave of capital: whether the Feynman architecture ships on schedule. A delay or a change in technical direction could trigger a valuation pullback.
Content is for reference only, not financial advice.