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Nvidia ( NVDA ) to use optical tech in networking chips, not GPUs

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Copper cables currently more reliable than optical

connections

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Nvidia ( NVDA ) has backed startups working on co-packaged optics

for AI

chips

By Stephen Nellis

SAN JOSE, California, March 18 (Reuters) - A promising

new chip technology that aims to cut energy usage is not yet

reliable enough for use in Nvidia's ( NVDA ) flagship graphics processing

units (GPUs), Nvidia's ( NVDA ) CEO Jensen Huang said Tuesday.

Co-packaged optics, as the emerging technology is called,

uses beams of laser light to send information on fiber optic

cables between chips, making connections faster and with

superior energy efficiency to those through traditional copper

cables.

During a keynote address to Nvidia's ( NVDA ) annual

developer conference at a packed hockey stadium in San Jose,

California on Tuesday, Huang said his company would use the

co-packaged optical technology in two new networking chips that

sit in switches on top of its servers, saying the technology

would make the chips three and a half times more energy

efficient than their predecessors.

The switch chips will come out later this year and into 2026

in a small but significant step toward advancing the technology.

But Huang told a group of journalists after his speech that

while Nvidia ( NVDA ) examined using it more widely in its flagship GPU

chips it had no current plans to do so, because traditional

copper connections were "orders of magnitude" more reliable than

today's co-packaged optical connections.

"That's not worth it," Huang said of using optical

connections directly between GPUs. "We keep playing with that

equation. Copper is far better."

Huang said that he was focused on providing a reliable

product roadmap that Nvidia's ( NVDA ) customers, such as OpenAI and

Oracle, could prepare for.

"In a couple years, several hundred billion dollars of AI

infrastructure is going to get laid down, and so you've got the

budget approved. You got the power approved. You got the land

built," Huang said. "What are you willing to scale up to several

hundred billion dollars right now?"

Silicon Valley entrepreneurs and investors have pinned their

hopes on the optics technology, which they believe will be

central to building ever-larger computers for AI systems, which

Huang said on Tuesday would still be necessary even after

advances by companies like DeepSeek because AI systems would

need more computing power to think through their answers.

Startups such as Ayar Labs, Lightmatter and Celestial AI

have raised hundreds of millions of dollars in venture capital -

some of it from Nvidia ( NVDA ) itself - to try and put co-packaged

optical connections directly onto AI chips. Lightmatter and

Celestial AI are both targeting public offerings.

Copper connections are cheap and fast, but can only carry

data a few meters at most. While that might seem trivial, it has

had a huge impact on Nvidia's ( NVDA ) product lineup over the past half

decade.

Nvidia's ( NVDA ) current flagship product contains 72 of its chips

in a single server, consuming 120 kilowatts of electricity and

generating so much heat that it requires a liquid cooling system

similar to that of a car engine. The flagship server unveiled on

Tuesday for release in 2027 will pack hundreds of its Vera Rubin

Ultra Chips into a single rack and will consume 600 kilowatts of

power.

Cramming more than double the number of chips into the same

space over two years will require massive feats of engineering

from Nvidia ( NVDA ) and its partners. Those feats are driven by the fact

that AI computing work requires moving a lot of data back and

forth between chips, and Nvidia ( NVDA ) is trying to keep as many chips

as it can within the relatively short reach of copper

connections.

Mark Wade, the CEO of Ayar Labs, which has received venture

backing from Nvidia ( NVDA ), said the chip industry was still navigating

how to manufacture co-packaged optics at lower costs and with

higher reliability. While the transition may not come until 2028

or beyond, Wade said, the chip industry will have little choice

but to ditch copper if it wants to keep building bigger and

bigger servers.

"Just look at the power consumption going up and up on racks

with electrical connections," Wade told Reuters in an interview

on the sidelines of Nvidia's ( NVDA ) conference. "Optics is the only

technology that gets you off of that train."