GlobalFoundries is positioning its new silicon photonics platform to capture a key bottleneck in the AI data center build-out, earning a stock upgrade from Wall Street.
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GlobalFoundries stock jumps 4% on new optics for AI data centers
GlobalFoundries (Nasdaq: GFS) shares climbed over 4 percent Monday after the company introduced a new silicon photonics platform aimed at solving a critical bottleneck in AI data centers. The new solution, called SCALE, is the industry’s first to exceed specifications from the Optical Compute Interconnect Multi-Source Agreement (OCI MSA), a group that includes AI leaders Nvidia, Broadcom, and AMD.
"With over a decade of innovation and manufacturing expertise in silicon photonics technology at our disposal, GF stands ready to unlock the future of high-bandwidth, energy-efficient connectivity," said Mike Hogan, chief business officer at GlobalFoundries, in a statement. The company said its technology is ready to support the industry's shift to co-packaged optics (CPO) and accelerate the adoption of optical interconnects.
The SCALE platform uses advanced silicon photonics to package optical transceivers directly with chips, a method that reduces power consumption and dramatically increases bandwidth density compared to traditional copper wiring. The technology utilizes both coarse and dense wavelength-division multiplexing (CWDM, DWDM) for bi-directional data transmission and includes a portfolio of devices like 50Gbps and 100Gbps micro-ring modulators.
The announcement positions GlobalFoundries as a key beneficiary of the growing demand for optical networking, which Goldman Sachs analysts recently called the next “buy-out-the-store” category for AI. The move prompted Cantor Fitzgerald analyst C.J. Muse to upgrade GFS stock to overweight from neutral, setting an $80 price target which implies an 18.5% upside from its Monday price of about $67.50.
The AI Interconnect Bottleneck
As AI models grow larger, the communication speed between chips in a data center has become a major limiting factor. While Nvidia CEO Jensen Huang has said both copper and optical solutions will be used, the industry is increasingly looking to optics to provide the necessary bandwidth for next-generation AI scale-up architectures. Interconnects and packaging have emerged as new supply-chain bottlenecks, creating a significant market opportunity.
GlobalFoundries' SCALE platform directly addresses this by exceeding the OCI MSA's requirements. The company has already demonstrated 8- and 16-channel bi-directional capabilities, a milestone it says uniquely positions it to capture the industry's transition to co-packaged optics.
Analyst Sees Secular Drivers Emerging
In his note to clients, Cantor Fitzgerald's C.J. Muse said he is "starting to see secular drivers emerge in the story" for GlobalFoundries, a stock he noted has been a "massive underperformer" compared to the broader PHLX Semiconductor Sector index. Muse pointed to the rise of silicon photonics, satellite communications, and physical AI as reasons for increased confidence in the company's long-term growth.
Even capturing a small piece of the silicon photonics market could be a "significant" opportunity for the chip manufacturer, Muse argued. The upgrade reflects a belief that these trends will meaningfully improve the company's top-line growth and overall earnings profile in the coming years.
This article is for informational purposes only and does not constitute investment advice.
[1] Optics is the next big AI bottleneck. This company could be an underrated beneficiary.[2] GlobalFoundries accelerates adoption of co-packaged optics for advanced AI data centers with SCALE optical module solution[3] GlobalFoundries upped by Cantor Fitzgerald ahead of investor day; unveils new packaging[4] Scientists unlock new way to engineer next-generation glass
