Recently, I noticed a very interesting phenomenon. The stock prices of AI server hardware companies have already been at high levels, and market capital is starting to look for the next wave of truly compound growth opportunities. The concepts of CPO and silicon photonics, because their technologies are still in the early stages, have enormous growth potential over the next 5 to 10 years. For many investors seeking excess returns, this is indeed an attractive track.

First, let’s discuss why these two concepts are often linked together. Traditional data transmission uses copper wires to send electrical signals, but as AI computing demands explode, this method has hit a bottleneck—too hot, too slow, too energy-consuming. Silicon photonics technology involves shrinking the bulky optical components down to chip scale, integrating them onto silicon substrates, and using light instead of electricity to transmit data. Meanwhile, optical co-packaged optics (CPO) involves placing optical modules directly next to CPUs or GPUs, encapsulated on the same board, significantly reducing power consumption and increasing speed. Simply put, silicon photonics is the core technology of CPO, and CPO is currently the most promising application endpoint for silicon photonics.

I believe many people haven't yet realized how complete this industry chain is. U.S. tech giants hold patents, chip design, and communication protocols, while Taiwan leverages the world’s strongest semiconductor manufacturing and testing capabilities to form an integrated foundry ecosystem. This advantage will become even more apparent after entering large-scale mass production around 2026.

From the industry chain perspective, in system and chip integration, U.S. giants like NVIDIA, Broadcom, and Marvell hold key switching chips and system architectures. TSMC is not just a foundry but also defining CPO packaging standards; its COUPE platform is central to silicon photonics development. For core optical components, U.S. companies include Lumentum and Coherent, while Taiwanese suppliers include United Integrated Services (聯亞), LightOn (光環), Huaxing Optoelectronics (華星光), and Wistron NeWeb (穩懋). In passive optical links and packaging, collaborations between Advanced Optoelectronic Technology (上詮) and TSMC are particularly noteworthy; their development of fiber array technology is a key interface for optical signals entering and exiting chips.

At the testing and equipment level, global giants like Advantest and Teradyne are setting CPO testing standards. Taiwanese companies such as Win Semiconductors (旺矽), Chroma (致茂), and Pan-Opto (汎銓) are also deeply involved in this field. Lastly, in wafer foundry and packaging, Tower Semiconductor is recognized as the most pure-play silicon photonics foundry globally, while Taiwan’s ASE (日月光) and Silicon Motion (訊芯-KY) are already leading in advanced packaging.

My personally favored Taiwanese stocks include TSMC, which not only manufactures chips but also helps define the entire CPO standard. Advanced packaging capabilities of companies like Silicon Motion-KY and ASE are also impressive, especially their leading-edge 800G and 1.6T high-speed transmission modules. Because of its deep cooperation with TSMC, Advanced Optoelectronic Technology benefits most in the critical fiber optic connection segment. Companies like Broadcom, United Integrated Services, and Pan-Opto are also worth watching.

On the U.S. side, Broadcom is the leader in CPO; its Tomahawk series has become the standard for AI data centers. Marvell has a high moat in high-speed optical interconnect chips and recently announced a deep partnership with NVIDIA, investing billions of dollars to integrate optical interconnects into next-generation architectures. Credo recently acquired DustPhotonics for $1.3 billion, gaining direct control of photonic integrated circuit technology and transforming into a company with a complete CPO solution—this flexibility surpasses even NVIDIA. Coherent and Lumentum, as leading optical component manufacturers, are accelerating their shift toward silicon photonics solutions as CPO demand explodes.

However, investing in these concept stocks requires caution. First, yield issues—since CPO involves packaging optical components with chips, if one part fails, the entire expensive GPU might be scrapped. Pay close attention to gross margin trends in financial reports; if revenue increases but gross margin declines, it may indicate ongoing yield struggles. Second, there’s the risk of specification wars—traditional pluggable modules like LPO (Light-Pass Optics) are also competing; they are cheaper and easier to maintain, and before 1.6T becomes widespread, they could take significant market share from CPO.

Another critical point is that if a company claims to be a silicon photonics concept stock but has very low optical communication revenue proportion, be wary of whether they are just riding the hype. By Q1 2026, many stocks have already surged significantly; continuing to chase them might not be wise. It’s better to observe earnings calls from giants like NVIDIA and Broadcom to see if they are actually placing orders with specific Taiwanese manufacturers. Lastly, don’t forget geopolitical factors—U.S. broadband infrastructure plans will influence optical communication demand, and silicon photonics, being cutting-edge technology, is vulnerable to U.S.-China tech tensions.

Ultimately, silicon photonics and CPO are not short-term themes but structural growth trends over the next 5 to 10 years. 2026, as the watershed year transitioning from R&D validation to large-scale mass production, will truly test each company’s ability to implement their technologies. My investment logic is simple: in the U.S., watch who is setting standards; in Taiwan, see who has actual supply chain orders. When capital chases new themes, don’t forget to return to fundamentals—prioritize companies that have been certified by major manufacturers and show a clear increase in optical communication revenue share. Only then can you avoid the noise in this fast-paced race and seize truly valuable investment opportunities.