North American AI upgrade network market: The scale has doubled in one year, copper cable has been king for a long time, and CPO layout is timely (Morgan Stanley)
Morgan Stanley updated its research report on Scale-Up Networks.
Morgan Stanley updated its research report on Scale-Up Networks. The market size is expected to reach approximately US$70 billion by 2030, an increase of more than 4 times from the estimate a year ago. The report believes that copper cable will be the first choice for short-distance interconnection in the long term due to its advantages of low power consumption and low cost. However, as the cluster scale expands, co-packaged optics (CPO) is the long-term evolution direction. It is expected to have small-scale applications in 2028 and large-scale applications after 2029. At the individual stock level, Morgan Stanley upgraded Keysight Technologies (KEYS) to positive rating and reiterated Nvidia (NVDA) as the first choice for the semiconductor sector. It is also optimistic about Broadcom (AVGO), Astera Labs, etc., believing that the recent correction of related stocks has been excessive, and the OCP conference in October will be an emotional catalytic event for the CPO sector. One-sentence conclusion: The market size of AI server internal interconnection networks is being rapidly enlarged. Copper cables have been dominant for a long time, but CPO investment opportunities are emerging, and the sector correction caused by short-term CPO concerns provides a good opportunity for layout. Positive/negative: Positive for Keysight Technologies (KEYS), NVIDIA (NVDA), Broadcom (AVGO), and Astera Labs; neutral bias is positive for the copper cable industry chain. The market's short-term concerns about CPO technology (for example, it will not be widely used before 2028) may be excessive, resulting in high-quality stocks being "wrongfully killed." The growth of these companies’ AI businesses has not yet been fully reflected in valuations. Catalysts: 1) The OCP Global Summit in October is the most important emotional catalyzer in the CPO industry; 2) The technical details of the next-generation cluster architecture of major GPU manufacturers (such as NVIDIA) are disclosed; 3) Keysight Technologies, Lumentum, Coherent and other companies will hold conferences in 3Q26 regarding order guidance for AI testing and optical business.