In recent weeks, the rocketing share price of Lumen Technologies (ex-CenturyLink)
Aside from the speculative fever which gripped the Lumen shares, following deals for its networking and cybersecurity equipment with cloud and technology firms, the spotlight is back on the datacenter switching market, upended by the magnitude of the AI workloads
Focus used to be on front-end networks using switches primarily to connect general-purpose servers ....but demand is shifting and upgrading to higher speeds, fast
The build-out of hyperscale datacenters by Microsoft
The switching market is projected to grow by 50% on the back of strong innovation but question marks remain – AI workloads ideally require both the largest bandwidth (specified over Ethernet) and the lowest latency (offered by InfiniBand), splitting the network switch supply with Nvidia-Mellanox on InfiniBand vs Nvidia alternatives, Cisco, Juniper and Arista platforms on Ethernet
Bandwidth requirements further create opportunity for fiber cabling suppliers such as Corning, Coherent and Lumentum, providing the network backbone for optical links in clusters of servers with hundreds of thousands CPUs and increasing the number of connections within the data centers significantly
Uncertainty in short term revenue - as the cloud providers work through their 2023 equipment stock build-up and as AI requirements delay new orders - hardly predicates medium-term industry weakness
There will be winners, maybe also losers, as the firms stake out market share according to their innovative abilities in addressing Tier-1 AI hyperscale infrastructure - or focus on Tier-2 & 3 Cloud Service providers
By resetting the portfolio over short time frames (such as 1 to 3 months) on the top right menu box, potential trend reversals are highlighted for Lumen but also for CommSope
Networks and Fiber Optics provides additional insights on the market segment