Nvidia Funded Laser Suppliers Amid Indium Shortage
Nvidia invested $4 billion in Lumentum and Coherent to secure production of essential AI data center hardware.
Updated on Oct. 2, 2026 in Semiconductors
Live Poll
Do you worry that hardware supply shortages will delay the AI tools you use daily?
In March 2026, Nvidia invested $2 billion each into Lumentum and Coherent to guarantee supply of indium phosphide laser transceivers. The investment followed severe export restrictions on raw indium from China, which caused global supplies to plummet.
Why it matters
Indium phosphide is critical for the high-speed laser transceivers powering AI data centers, and current demand for these components exceeds supply by over 30%. The investment reflects a strategic move by major technology firms to bypass severe material scarcity in the semiconductor supply chain.
Prices for six-inch indium phosphide wafers climbed 250% to approximately $5,000 as Chinese export controls caused a 72% year-over-year decline in raw indium availability by late 2025. Coherent has previously delivered 250 million indium phosphide lasers for datacom transceivers, a volume currently threatened by a persistent market imbalance.
The players
Nvidia
A designer of graphics processing units and AI hardware platforms that is currently expanding its data center ecosystem.
Lumentum
A developer of optical and photonic products that operates five dedicated indium phosphide wafer fabrication facilities.
Coherent
A materials and laser technology firm that has shipped over 250 million indium phosphide lasers for data communications.
Michael Hurlston
The CEO of Lumentum who has identified critical supply chain shortages impacting high-speed optical hardware.
The details
Indium phosphide is a semiconductor material used to manufacture high-speed laser transceivers, which act as the optical interface for moving data between AI processors. Lumentum produces these wafers through its own fabrication facilities, a process that requires years of development to scale compared to standard silicon foundries. China, which controls 70% of global refined indium production, moved to restrict these exports in February 2025, creating a bottleneck that has forced firms like Nvidia to capitalize suppliers directly.
Timeline
February 2025: China imposed export controls on indium phosphide.
Late 2025: Chinese indium exports fell 72% year over year.
March 2026: Nvidia invested $4 billion in Lumentum and Coherent.
May 2026: Lumentum reported demand exceeds supply by over 30%.
July 8, 2026: CEO Michael Hurlston spoke at the RAISE Summit.
The Tech Race
The supply shortage highlights a shift toward vertical integration as firms attempt to bypass the constraints imposed by the 2025 Chinese export control list for critical semiconductor materials. While Lumentum and Coherent remain key players, the ability to qualify new production lines remains a significant barrier for others in the race to scale AI data centers.
The persistent supply imbalance for indium phosphide lasers is expected to continue through fiscal 2027, potentially delaying the deployment of next-generation data center infrastructure. Industry observers should monitor Lumentum’s capacity utilization, as the firm expects to sell out its entire 2028 production allocation within two quarters.
The takeaway
The semiconductor industry is currently navigating a significant raw material bottleneck that forces major AI hardware providers to bankroll their own supply chain stability. Watch for capacity updates in Lumentum's fiscal 2027 filings to determine if these investments are successfully offsetting global supply declines.
Further reading
For broader trends in component manufacturing, visit Semiconductors.
Source note: This article includes information reported by Startup Fortune.
Live Poll
Do you worry that hardware supply shortages will delay the AI tools you use daily?
