Corning Lifts Expectations Amid Fiber Demand in AI Data Centers

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Fiber vendor Corning mentioned it is seeing better-than-expected gross sales of its fiber merchandise amongst knowledge middle operators.

Particularly, the corporate mentioned it now expects second-quarter gross sales of round $3.6 billion, which is up from its prior steerage of $3.4 billion. The corporate additionally forecast a return to year-over-year development in its earnings.

“The outperformance was primarily pushed by the sturdy adoption of our new optical connectivity merchandise for generative AI,” Corning’s CEO Wendell Weeks mentioned in a launch. He mentioned Corning now expects to develop by greater than $3 billion in annualized gross sales over the following three years as “cyclical elements and secular traits mix.”

Corning is scheduled to report its full second quarter outcomes on July 30.

Corning attributed its extra optimistic outlook to quite a lot of elements, however major amongst these was gross sales of fiber for graphical processing unit (GPU) interconnections inside knowledge facilities. GPUs – together with these from Nvidia – are extensively considered as important to powering superior AI providers. 

For instance, Corning mentioned GPU-based parallel computing for AI requires 10x as a lot fiber as conventional cloud networks. “Blackwell GPU [from Nvidia] rack homes 72 GPUs, every linked by 8 fibers, for a complete of 576 fibers, or 18X as many fibers as a legacy CPU rack,” Corning wrote.

Corning’s inventory bounced on its revised second quarter steerage, rising from round $38 per share previous to the corporate’s announcement Monday to round $42 per share after.

AI’s Affect

Corning manufactures a lot of the bodily cabling utilized in US fiber networks. Because of this, the corporate is usually considered as a bellwether within the US telecom trade.

However fiber can be a key networking element inside knowledge facilities. And AI suppliers like Microsoft, Google and Amazon have been investing closely into knowledge facilities as a way to set up the Nvidia GPUs that energy most AI providers like ChatGPT.

Certainly, Synergy Analysis Group not too long ago reported that the variety of giant knowledge facilities operated by hyperscale suppliers globally reached 992 on the finish of 2023. The agency mentioned that determine ought to extend by 120-130 yearly, “with generative AI know-how being a major purpose for that elevated scale.”

The upswing in knowledge middle investments coincides with a dramatic discount in spending amongst telecom community operators globally. That spending slowdown has minimize into the funds of distributors starting from Ericsson to Crown Fort to Corning.

Certainly, the slowdown has pushed quite a lot of telecom distributors to hunt alternatives elsewhere. Nokia, for instance, cited the info middle alternative as a major purpose behind its $2.3 billion proposal to buy Infinera.

“One of many key sights of this acquisition is that it considerably will increase our publicity to knowledge facilities,” Nokia CEO Pekka Lundmark defined of the deal.

Nokia is not alone. For instance, Cisco too has excessive AI expectations.

However suppliers together with Corning have prompt that community operators will finally resume spending.

“We anticipate optical communications gross sales will spring again as a result of we imagine and our provider prospects have confirmed that they bought extra stock throughout the pandemic and that they have been using this stock to proceed deploying their networks,” Corning CEO Weeks mentioned in January. “We imagine these carriers will quickly deplete their stock and execute on the elevated broadband deployment plans they’ve communicated to us over the past a number of months.”

In a doc linked to its newest launch, Corning reiterated these expectations, pointing particularly to the US authorities’s $42.5 billion Broadband Fairness Entry and Deployment (BEAD) program. The corporate mentioned it expects operators to start spending on BEAD-related fiber tasks beginning subsequent yr.