28 Jan 2025
Coherent, Lumentum, and Fabrinet valuations drop on news of 'Sputnik moment' for AI industry.
The stock prices of several photonics companies have crashed in value, following the sudden emergence and popularity of a low-cost generative artificial intelligence (AI) model developed in China.
China’s “DeepSeek” AI assistant is available for free, has been developed in an open-source format, and is claimed to run at a fraction of the price of rivals like ChatGPT that rely on cutting-edge technology and specialist data centers using high-speed optical transceivers.
News of that apparent breakthrough, dubbed “AI’s Sputnik moment” by venture capitalist Marc Andreessen on social media platform 'X', sent the stock price of critical chip supplier Nvidia down 17 per cent on January 28 - equivalent to a drop in value of nearly $600 billion.
Lithography equipment supplier ASML, whose systems are used to make the most advanced AI chips, was also hit, dropping by 6 per cent. And photonics companies Lumentum, Coherent, and Fabrinet - suppliers of optical transceivers used by Nvidia and others - fared even worse, with all three crashing by around 20 per cent.
Recent years have seen exports of the highest-specification products from Nvidia and ASML to China vetoed by the US government, partly in a bid to slow the development of AI computing in the country.
Photonics-AI connection
While there remains some skepticism about the DeepSeek technology, the slumping valuations reflect fears that US tech giants may need to retrench, and perhaps rein in the colossal spending plans for AI data centers that had been earmarked for 2025 and beyond.
During the SPIE Global Business Summit, which took place January 28 alongside the Photonics West event in San Francisco, several speakers from the photonics industry highlighted the critical role the technology is playing in the build-out of AI infrastructure.
Coherent’s chief marketing officer Sanjai Parthasarathi said that the “megatrends” impacting the communications element of that business were “all about AI” and the need for optical connections between clusters of AI chip packages.
MKS Instruments CEO John Lee also stressed the AI connection, highlighting the key role that processes like high-speed laser via hole drilling played in advanced packaging technology, helping create the high-specification PCBs that enable the likes of Nvidia to combine multiple cutting-edge chips in a single package and increase computing speeds.
UBS economist Mike Ryan, who gave the opening talk at the San Francisco summit, said that although it should be treated with some skepticism, the DeepSeek development could prove to be a “game changer” if it worked as well as initially claimed.
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