AI computing power expansion boosts interconnection demand Evercore bullish on the prospects of multiple semiconductor manufacturers

The latest research from investment banks shows that the network and optical interconnects in AI computing infrastructure remain the key bottleneck for system expansion, with related vendors expected to continue benefiting from increased revenue and profits. Evercore stated that their channel research on AI engineers results in a favorable outlook for NVIDIA Corporation (NVDA.US), Broadcom Inc. (AVGO.US), Astera Labs (ALAB.US), Marvell Technology, Inc. (MRVL.US), and MACOM Technology Solutions (MTSI.US), and reiterated their "outperform" ratings for these companies. Led by Mark Lipacis, the Evercore analysis team pointed out that their research with 20 AI engineers confirmed that connectivity is still a core limiting factor for AI systems, both in terms of supply and speed. Vendors that can deliver solutions at scale will benefit from the demand growth in the future. "The strategies and supply chains of various hyperscale cloud vendors are not the same, but the overall research results are positive for the above companies." Regarding NVIDIA Corporation, analysts stated that the company is working on a co-packaged optical version of NVLink switch that matches the Rubin Ultra release schedule, with a target date in the second half of 2027, although some industry insiders believe it is more likely to be delayed until 2028. The team believes that PCIe and Ethernet could potentially take market share from NVLink, but NVLink will still dominate the high-end market due to its superior performance. NVIDIA Corporation has developed a 1.6T (terabits per second) digital signal processor (DSP), which is expected to meet about 50% of the internal demand, with the rest provided by Broadcom Inc. Regarding Broadcom Inc., Evercore expects that their electro-absorption modulated laser (EML) capacity will increase from around 43-44 million units in 2025 to 50 million units in 2026; continuous wave (CW) laser capacity will expand from around 15-16 million units in 2025 to 30 million units in 2026. Analysts added that non-Broadcom Inc. switches face challenges in supporting linear driver pluggable optical modules (LPO); the company's 1.6T DSP is considered an industry benchmark, with most of Meta Platforms' 1.6T DSP demand expected to be taken on by Broadcom Inc. Regarding Astera Labs, Evercore stated that Amazon.com, Inc.'s Trainium-3 is expected to use Astera's Scorpio X switch in two out of three SKUs, with the third SKU having no switch. Analysts believe that Astera is gradually being viewed as a mature vendor, rather than a startup. Regarding Marvell Technology, Inc., the team stated that Alphabet Inc. Class C's (GOOG.US, GOOGL.US) demand for 1.6T DSP is expected to be supplied entirely by Marvell. In the 800G DSP field, Marvell holds about 70% market share, with Broadcom Inc. holding the remaining 30%. Marvell is considered to have an advantage in 1.6T TIA performance and new packaging architectures. Additionally, analysts pointed out that Celestial AI is seen as part of Marvell's broader strategic efforts to compete more effectively with Broadcom Inc., creating a one-stop ASIC full-stack design cooperation capability. Regarding MACOM Technology Solutions, channel information indicates that the company continues to increase its market share in the 1.6T photodetector (PD) field. The unit price of 1.6T PD is about $2.5-3, significantly higher than the $0.5-0.6 for 800G PD. Evercore expects that MACOM is poised to capture 50-60% of the 1.6T module market, with the remaining share shared by vendors such as Broadcom Inc., GCS, and SiFotonics.