Morgan Stanley Research Report Analysis: Large-Scale CPO Adoption Not Until 2029, Copper Cables Can Last Another Two Years
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Morgan Stanley Research Report Analysis: Large-Scale CPO Adoption Not Until 2029, Copper Cables Can Last Another Two Years
What drives this timeline is not technical bottlenecks, but the expansion of AI cluster scale.
Navigating Web3 tides with focused insightsBy: Rita
TechFlow Guide
Optical communication stocks have been falling recently, with the market worried that the introduction of CPO (Co-Packaged Optics) in Scale-Up networks will be "delayed." Morgan Stanley's latest report offers a counter-consensus judgment: only limited introduction in 2028, with true large-scale adoption of CPO waiting until 2029 and beyond. The market has thought the timeline was too fast; this is not a delay. Before then, copper cables still have a two-year window. Driving this timeline is not a technical bottleneck, but the expansion of AI cluster scales. NVIDIA Blackwell starts with 72 GPUs, reaching 1152 with Feynman. Communication demands continue to rise, but copper cables can hold on for a while longer thanks to innovations like PAM4, DSP, and retimers. This is the key coordinate for understanding AI infrastructure investment over the next two years.
Market Size Quadruples in One Year, But CPO Cannot Be Rushed
When Morgan Stanley first proposed the Scale-Up network opportunity last year, the 2029 market size was estimated at $17 billion. One year later, this figure has been raised to $73 billion in 2030, more than quadrupled. But the CPO penetration curve has not risen along with the slope of the market size. Morgan Stanley expects only limited introduction of CPO in Scale-Up networks in 2028, with the true inflection point in 2029 and beyond. The core reason is that CPO involves rebuilding the packaging, optical engine, and laser supply chains, not just upgrading a single component, but migrating the entire ecosystem. NVIDIA's Feynman generation is the time anchor for large-scale CPO rollout.
Copper Cables' "Death Date" Postponed Time and Again
Copper cables have always been the preferred choice in data centers: low cost, reliable, low power consumption. Its "death date" has been called many times, but each time it has been given new life by new technologies. PAM4 modulation allows more bits to run on copper cables, more powerful DSPs keep signals intact over longer distances, and retimers pull signals back before they attenuate to unreadable levels. Morgan Stanley believes copper cables will stay in Scale-Up longer than the market expects. The real opponent of copper cables is not CPO, but the physical scale of AI clusters itself. As clusters move from 144 to 576 and 1152 GPUs, communication distances between racks are lengthening, and signal rates are jumping from 100G to 200G and 400G. The physical limit of copper cables will eventually arrive.
Non-NVIDIA Ecosystem Taking Shape, Copper and Optics Each Take One End
2026 is the starting point for the non-NVIDIA Scale-Up market. AMD MI400, AWS Trainium 3, and Microsoft Maia begin mass production, creating incremental opportunities for third-party network suppliers. On the copper cable side, Astera Labs' Scorpio-X is already shipping in Trainium 3, with accelerated volume in the second half of 2026. On the optical communication side, LITE, COHR, and GLW's CPO/NPO product lines are positioned for the window after 2028. Morgan Stanley believes the October OCP Summit is the true catalyst for CPO sentiment, and the Q2 earnings season may not be the time yet. Morgan Stanley maintains Overweight ratings on NVIDIA, Broadcom, Astera Labs, and Keysight.
TechFlow Perspective
The real judgment is that the discussion on CPO has been overly compressed by the market. Investors are accustomed to tracking technology penetration rates by quarter, but CPO migration is calculated by generation. NVIDIA spans four architecture generations from Blackwell to Feynman; CPO is something that happens on this time scale. The window period for copper cables was always this long; it's just that the market is accustomed to describing it as a "delay." The explosion point for optical communication companies (LITE, COHR, GLW) is not in 2027, but after 2029. Before that, test equipment manufacturer Keysight is a beneficiary in another dimension. Whether copper wins or optics wins, they must pass testing first; architectural diversity itself is its growth engine.
Disclaimer
This article is a compilation and interpretation by TechFlow Research of a third-party broker research report (Morgan Stanley, July 13, 2026). The ratings, target prices, earnings forecasts, and related judgments cited in the text are the views of the broker's analysts, represent only the position of their affiliated institution, do not represent the views of TechFlow Research, and do not constitute any investment advice.
The market carries risks; decisions must be independent. This article should not be used as a basis for buying or selling any securities.
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