Episode 6: Photonic Interconnects – The Next AI Bottleneck

For the past several years, the AI industry has been focused on one constraint: compute. More GPUs. Larger clusters. Faster processors.

But that bottleneck is changing.

As AI systems continue to scale, the limiting factor is no longer simply how much compute we can build, but how quickly data can move between processors, servers, racks and entire AI factories. Increasingly, the constraint is the network itself.

In this episode, we explore photonic interconnects and explain why the future of AI infrastructure will be built on light rather than copper.

Using a four-layer framework, we examine where photonics fits across the AI Continuum, from connections inside processor packages, through hyperscale data centres, all the way to laser communications between satellites in orbit. We also analyse one of the least understood strategic materials in the AI supply chain: indium phosphide, the foundation of modern optical communications and an emerging geopolitical bottleneck.

Finally, we present the QF-MI base case, highlighting where we believe the greatest investment opportunities, and risks, are likely to emerge over the next several years.

In This Episode

• Why the AI bottleneck is shifting from compute to data movement
• Understanding the I/O Wall and why GPUs are waiting for data
• Why copper is approaching its physical limits
• How co-packaged optics could transform AI hardware
• The four layers of the photonics ecosystem
• The rapid growth of 800G and 1.6T optical networking
• Why orbital computing depends on laser communications
• Indium phosphide: the hidden material underpinning AI infrastructure
• China's strategic position in the optical supply chain
• The QF-MI investment framework and key indicators we're monitoring

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The Market Pulse and In the Spotlight research series are free to read. Subscribers also receive the Weekly Outlook, Weekend Debrief, and the Monthly Strategic Research Report, providing institutional-grade analysis of the capital flows and physical constraints shaping the AI industrial economy.

Chapters

0:19 AI Supercycle Begins
2:33 The Photonics Bottleneck
6:27 Inside the Chip Limits
9:08 Co-Packaged Optics Arrive
10:51 Transceivers Power the Network
14:03 Laser Links in Orbit
15:53 Indium Phosphide Risk
19:08 Investment Base Case
21:52 Light Connects the Stack

Tags: AI, semiconductors, HBM, memory, energy, nuclear, uranium, copper, rare earths, data centres, photonics, capital allocation, macro, AI infrastructure

• (00:19) - AI Supercycle Begins
• (02:33) - The Photonics Bottleneck
• (06:27) - Inside the Chip Limits
• (09:08) - Co-Packaged Optics Arrive
• (10:51) - Transceivers Power the Network
• (14:03) - Laser Links in Orbit
• (15:53) - Indium Phosphide Risk
• (19:08) - Investment Base Case
• (21:52) - Light Connects the Stack