Brief · NFR-2026-02 · April 2026 Edition
Copper, optics, and hybrid paths for AI infrastructure 2026–2029.
A buyer decision brief on where capital should move in the AI data center interconnect layer. For corporate strategy and corporate development teams at networking, chip, and infrastructure companies, and for infrastructure investors evaluating the category.
How should corporate strategy, corporate development, and infrastructure investors evaluate the emerging interconnect architecture shift, and how should that evaluation translate into capital, roadmap, or partnership decisions between now and 2029?
The AI infrastructure stack has reached a new binding constraint in 2025 and 2026: interconnect. At 224 Gbit/s signaling, copper interconnects consume roughly 30 percent of total cluster power, with effective reach limited to less than one meter without amplification. Between December 2025 and April 2026, more than $9 billion in strategic capital moved into the interconnect layer — Kandou at $400M valuation, Ayar Labs at $3.75B, the Marvell acquisition of Celestial AI for up to $5.5B, and Nvidia's $4B commitment to Lumentum and Coherent.
These are not four companies competing for the same dollar. They represent three architectural paths plus one enabling ecosystem layer. This brief provides the framework to distinguish them.
The following is the unedited executive summary from the full brief. Additional preview chapters are available on request.
The AI infrastructure stack has reached a new binding constraint in 2025 and 2026: interconnect. Nvidia itself has stated that the GB200 NVL72 rack, had it used optical transceivers and retimers instead of direct-attach copper cables, would have drawn an additional 20 kilowatts per rack — 120 kW instead of 100 kW. That single data point reframes the interconnect debate: it is no longer an engineering preference, it is a capital and power allocation decision with measurable economic weight per rack.
Between December 2025 and April 2026, more than $9 billion in strategic and financial capital has moved into the interconnect layer. Kandou AI raised $225 million at a $400 million valuation for copper extension technology. Ayar Labs raised $500 million at a $3.75 billion valuation for co-packaged optics. Marvell completed its acquisition of Celestial AI for $3.25 billion upfront, with up to $5.5 billion in total consideration, for photonic fabric technology. Nvidia committed $4 billion across Lumentum and Coherent to secure laser and optical component capacity. Credo agreed to acquire DustPhotonics for approximately $750 million.
These are not four companies competing for the same dollar. They represent three architectural paths — copper extension, co-packaged optics, and photonic fabric — plus one enabling ecosystem layer that benefits from any of the optical paths. The commercial question for enterprise and investor buyers is not which company wins. It is: which path should my capital, my roadmap, and my partnership commitments align with, and at which point in the 2026–2029 window?
The dominant strategic mistake in 2026 is treating this as a single binary decision. Copper is not uniformly obsolete, and optics is not uniformly ready. Scale-up networking (tight, intra-rack, latency-sensitive) and scale-out networking (looser, inter-rack, bandwidth-dense) are distinct problems with distinct economics.
Bottom line: Scale-up and scale-out are not the same decision. The real market question is not copper versus optics in absolute terms — it is: on which layer does the economics tip first, and what does that mean for capital, roadmap, and partnership commitments through 2029?
Why interconnect is the binding constraint in 2025–2026. The power economics of copper at 224 Gbit/s. Why $9B moved in five months.
The Interconnect Exposure Matrix and CROSS path logic for translating architectural shifts into capital and roadmap decisions.
Kandou, Ayar Labs, Celestial/Marvell, and the incumbent optical ecosystem. What each wager is actually betting on.
Who owns this decision. The distinct buyer profiles for corporate strategy, M&A, product, and investment readers.
Decision matrix. 90-day sprint for each buyer profile. Capital deployment triggers and rebalancing scenarios through 2029.
The strategic mistake to avoid. The buyer stance. How to use the brief across investment, roadmap, and partnership contexts.
Plus appendices: Glossary, Methodology and Sources.
One reader, one organization. PDF delivered within two business days of payment confirmation.
Up to five readers within one organization. Internal distribution permitted.
Organization-wide access. Distribution rights for internal knowledge platforms included.
All prices are net and exclude applicable VAT. B2B only; requests require confirmation that the requester acts in a commercial or professional capacity. Licensing terms are detailed in the Terms of Service. Northfold Research publications do not constitute legal, tax, investment, or implementation advice.