MW Optics is the next big AI bottleneck. This company could be an underrated beneficiary.

By Britney Nguyen

GlobalFoundries just introduced a new technology to boost the use of co-packaged optics in AI data centers

GlobalFoundries' stock was up 4% on Monday.

Goldman Sachs analysts recently called optical networking the next "buy- out-the-store" artificial-intelligence category that could see extreme demand in the short term. Now, GlobalFoundries is looking to cash in on the rush.

Shares of the chip manufacturer $(GFS)$ were up 4% on Monday following the company's introduction of technology for copackaged optics - an advanced chip-packaging technology to package optical transceivers with chips to reduce power consumption and increase bandwidth.

GlobalFoundries said its new optical module solution, known by the acronym SCALE, improves bandwidth density and the ability to scale systems relative to what traditional copper-based wiring offers. The company has been able to increase data transmission capacity on a single optical fiber.

The demonstration is "a fundamental technology milestone that uniquely positions GF to support the industry's shift to CPO and accelerate the adoption of optical scale-up interconnects," the company said in a statement.

Interest in CPO is growing amid the AI data center build-out, with the Goldman analysts pointing to interconnects, optical components and packaging technologies as emerging supply-chain bottlenecks in a note published last month. Wall Street has been divided over whether optical components will cut into demand for traditional copper, though Nvidia (NVDA) CEO Jensen Huang has recently touted the use of both approaches for the company's scale-up networking technology.

See more: It's been one of Wall Street's most heated AI debates - and it may be totally missing the point

GlobalFoundries added that its platform is the first in the industry to exceed requirements for modern AI data-center optical interconnects set by the Optical Compute Interconnect Multi-Source Agreement, which includes Nvidia, Broadcom $(AVGO)$ and Advanced Micro Devices $(AMD)$.

Cantor Fitzgerald analyst C.J. Muse said he's "starting to see secular drivers emerge in the story" for GlobalFoundries, despite its stock being a "massive underperformer" compared with the broader PHLX Semiconductor Sector SOX since the chip maker's first investor day in August 2022.

Muse pointed to the rise of silicon photonics, satellite communications and physical AI as reasons he's more confident that the company can meaningfully improve its top-line compound annual growth rate over the long haul.

GlobalFoundries' photonic integrated-circuits business looks strong, Muse said, and even if the company is only able to capture a sliver of the overall market for silicon photonics, that could be a "significant" opportunity. Additionally, the company's portfolio of industrial technology is expected to get a boost from edge computing, Muse said.

He upgraded the stock to overweight from neutral Monday, saying that the trends will significantly improve the company's earnings profile.

Muse's $80 price target for GlobalFoundries' stock represents upside of 18.5% from its price of about $67.50 on Monday.

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-Britney Nguyen

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May 04, 2026 14:21 ET (18:21 GMT)

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