Coherent (COHR) is expanding its Sherman, Texas facility to boost production of 6-inch indium phosphide (InP) wafers. The move comes as global demand for AI optics surges, with the expanded capacity seen as critical for NVIDIA's AI infrastructure.
Why the expansion matters for AI
The Sherman plant will scale up output of InP wafers, a key material for photonic components used in high-speed data transmission. AI systems rely on massive data movement between processors, and optical interconnects built on InP can handle the bandwidth while keeping power in check. Coherent's expansion directly responds to the growing need from cloud providers and AI developers for faster, more efficient connections.
Six-inch wafers are larger than the previous standard, meaning more chips per wafer and lower per-unit costs. That's important as AI workloads push data centers to upgrade their internal networking. Without enough InP capacity, the supply chain for AI optics could tighten.
The NVIDIA connection
NVIDIA's AI infrastructure depends on high-speed optics to link thousands of GPUs in training clusters. The company has been signaling that interconnect bottlenecks are a growing concern as models scale up. Coherent's expanded InP production is positioned to support that demand. While neither company has disclosed specific contracts, the timing points to a strategic alignment — Coherent ramps wafer output just as NVIDIA pushes for faster optical links in its next-generation systems.
The Sherman facility isn't new; Coherent already operated there. But the expansion marks a bet that AI-driven demand for InP will keep rising. The company hasn't said when the expanded line will reach full production, but the ramp is underway.
Other chip and optics makers are watching. If Coherent's bet pays off, it could trigger more investment in InP wafer capacity. For now, the question is whether the expanded Sherman plant can deliver enough wafers to ease the pressure on AI optics supply — and how quickly NVIDIA will absorb them.
