Huang Renxun's "Ignition" Failed: GTC Brought Up Optical Communications, Why Did the Sector Cool Down Instead?

Many people think that this time at GTC, Jensen Huang will completely ignite optical communications.

After all, this sector has been hot for a long time. From CPO to silicon photonics, from optical modules to high-speed interconnects, the market has almost projected all imaginable AI infrastructure upgrades onto this area. Coincidentally, OFC 2026 is also happening in the same week—the technical conference runs from March 15 to 19, and the exhibition from March 17 to 19. One is Nvidia outlining its roadmap, and the other is the entire optical communications industry showcasing its strength. Naturally, the excitement has been pushed to a peak.

So before Jensen Huang takes the stage, the market isn’t expecting just an ordinary speech but a spark. What everyone wants to hear isn’t just “the future is promising,” but a clearer statement: In the next phase, optical will be the main focus.

Unfortunately, Jensen Huang didn’t frame his speech that way.

Jensen Huang’s GTC keynote scene Source: The Business Journals

Why does Nvidia talk about optical, but the market still doesn’t buy in?

Recently, the hype around optical communications isn’t just because it sounds advanced, but because the logic is so straightforward—As AI clusters grow larger, data transmission pressure increases, and copper will inevitably hit a bottleneck. So, is it time for optical to take over?

This story is too easy to believe. And because it’s so simple, the market naturally pushes further—since the direction is so clear, the realization shouldn’t be too far off.

Before GTC, many investors weren’t really debating “can optical do it,” but were betting early on whether Jensen Huang would make a more aggressive statement than expected.

Data center racks and cabling Source: The Fiber Optic Association

The issue isn’t whether he mentioned optical.

He definitely did, and quite prominently. But what Jensen Huang actually emphasized was that optical is important, but copper won’t be phased out in the short term—“Nvidia plans to continue using copper-based connections and updated optical technologies in upcoming platforms (including Vera Rubin Ultra and future systems).”

What the market wanted to hear was that optical would soon dominate across the board. That small difference was enough to cause a market reversal.

This is also the most awkward part for the market because stocks are often most afraid of not being as bullish as expected, rather than outright bad news.

The issue isn’t whether people are optimistic about optical, but whether they are ready to realize gains now.

The most common misinterpretation this time is that many see it as “optical is failing” or “copper wins.”

But that’s not quite right.

A more accurate way to put it is the long-term logic for optical hasn’t changed; what’s changing is the market’s expectation of how quickly it will be realized. Nvidia’s official technical blog describing the Vera Rubin platform clearly explains this: larger-scale systems will use direct optical connections for rack-to-rack links, but many internal rack connections will still rely on copper spine and pre-terminated copper cables.

Simply put, inside many racks, copper remains dominant; only at larger scales and cross-rack connections does optical’s importance start to become more apparent.

So, what GTC is truly correcting isn’t the direction but the timeline. The market previously bought into a big future; now it’s starting to ask: Who will realize this future first, and when?

CPO equipment/system display Source: Cisco Blogs

Market shifts from “full optical” to “beginning to differentiate”

Because of this, after the speech, the market isn’t expecting “the whole sector to surge together,” but rather a period of turbulence followed by differentiation.

Barron’s summarized this well: the market interpreted Jensen Huang’s stance as “copper and optical will both continue to be used,” which shifted the sector from a “rise whenever optical is involved” theme to a more nuanced “who truly benefits and who is just riding the hype.”

Looking at individual stocks, this differentiation becomes even clearer.

• Lumentum (LITE.M) continues to be discussed not just because it’s in the “optical” sector, but because it’s no longer just a concept stock in investors’ minds. It’s now considered part of the “next-generation interconnect systems” list. Even if short-term sentiment fluctuates, market understanding tends to stay at “pace changes” rather than “logic disappears.” Barron’s noted that on March 17, Lumentum was one of the few stocks still closing higher;
• Coherent (COHR.M) is similar but not valued exactly the same. When the sector shifts from “big story” to “practical implementation,” investors focus more on which companies benefit at what level, how soon they can realize gains, and whether expectations were overly optimistic. It’s not about lacking direction but about entering a phase of “logical but needing recalibrated timelines.” Barron’s also pointed out that on the same day, Coherent’s performance was noticeably weaker than Lumentum’s;
• Ciena (CIEN.M) is somewhat unique. Unlike highly volatile names that can be easily pushed up and down by sentiment, Ciena is more about prompting the market to think about “how will large-scale optical networks truly unfold.” Its significance isn’t just riding a hot trend but reminding everyone that if large-scale AI infrastructure upgrades continue, it’s not just about component stories but about how the entire network capability advances. Barron’s post-GTC summary categorized Ciena as a “relatively stable” player in the optical chain;
• Applied Optoelectronics (AAOI.M) exemplifies the most volatile type in this rally. Stocks like this tend to be quickly pushed higher in good sentiment but also the first to pull back if catalysts aren’t strong enough to sustain expectations. Their volatility shows that when the market doubts whether realization will be slower than expected, the most affected are those that previously surged the fastest and had the highest expectations. Barron’s on March 17 also listed AAOI as under pressure;
• Credo (CRDO.M) reveals another important shift after this GTC: it’s not just about “being in copper” to benefit. Jensen Huang clarified that copper won’t exit immediately, but that doesn’t mean all copper companies will be rewarded right away. Investors will start asking more detailed questions: which segment of copper connectivity benefits most? Short-distance? AEC? Other links? Barron’s analysis shows Credo’s stock also experienced significant fluctuations, indicating the market no longer accepts the simple “align with the theme and all will rise” narrative.

OFC conference scene Source: Public News Photos

Ultimately, looking at these stocks together, the key point isn’t who rises or falls, but that the market is starting to treat them as assets with different positions, different realization timelines, and different degrees of certainty.

Earlier, everyone was more willing to lump them together, but after GTC, that basket is being unpacked. AI interconnect isn’t a “choose between optical and copper” dilemma but a “who uses what where” division of labor.

At its core, Jensen Huang didn’t deny optical; he simply didn’t deliver the message the market most wanted to hear. After GTC, the focus isn’t just on “whether there’s a story,” but on “who is closer to implementation and realization.” That’s why, even within the same optical communication sector, stock performances are beginning to diverge noticeably.

Earlier, many companies could be traded as part of the same basket; but from now on, the market will scrutinize more closely: who benefits first, who proves out first, and who was just riding the hype.

True differentiation has only just begun.

The direction of optical hasn’t changed; what’s changed is how the market views this sector.

In the past, investors were more willing to buy into the imagination; now, they will focus more on actual realization. The real gap will be determined not by who can tell the best story, but by who can turn the story into results first.

Let’s wait and see.