The line between copper and fiber is dissolving

Credo Technology, a San Jose designer of high-speed connectivity silicon whose active electrical cables (AECs) carry data between accelerators inside an AI rack, has spent two years being described as the company that keeps optics out of the rack. Copper reaches about seven metres and draws roughly half the power of an optical link, which is why hyperscalers bought it, and why the company is the de-facto standard for intra-rack and rack-to-rack hops.

Its own guidance points somewhere else. On the June call covering the quarter ended 2 May, management guided fiscal 2027 to more than 80% revenue growth and said optical digital signal processors (DSPs), a silicon-photonics interposer and its ZeroFlap optics line would contribute more than $600m of it. Against fiscal 2026 revenue of $1.335bn, that is not a side project. Management also said scale-up copper — the accelerator-to-accelerator links the bull case rests on — contributes little in fiscal 2027 and becomes material only in fiscal 2028.

Astera Labs is travelling the same road from the other end. The Santa Clara firm sells PCI Express retimers, smart cable modules and, since this year, the Scorpio fabric switch that stitches accelerators together inside a rack. On its 4 August call it laid out a three-phase optical plan: high-density fiber with a tier-one artificial-intelligence provider in 2027, near-package-optics chipsets the same year, and co-packaged optics built into Scorpio from 2028. An optics stumble, in other words, is not a copper windfall for either of them.

What the two businesses did

Credo's fourth-quarter revenue was $437.0m, up 157.0% year on year. Gross margin reached 68.2%, the fifth straight quarter above the mid-sixties band the company was long assumed to live in, and operating margin widened from 20.4% a year earlier to 35.7%. The crack is sequential rather than annual: quarter-on-quarter growth ran 51.9% in the January quarter and 7.4% in the May quarter. Concentration is unresolved — the top four customers were 34%, 27%, 16% and 10% of revenue, about 87% between them.

Astera Labs is accelerating where Credo decelerated. June-quarter revenue of $392.4m grew 104.5% year on year, up from 93.4% growth in March, and management guided the September quarter to $540-560m, roughly 40% sequential growth. Gross margin is the cost: 76.3% in March, 73.3% in June, guided near 72%, with a long-run target of 70%. Management attributes the step-down to Scorpio's board-level mix rather than price, and says Scorpio margins converge on the corporate average at volume. Scorpio X alone is targeted above $1,000 of content per accelerator.

The two also compete directly. Astera's Taurus line is shipping pre-production 100G-per-lane silicon for 800G active electrical cables, with a ramp expected in the second half — the socket Credo owns.

The dislocation is next door

MACOM Technology Solutions makes analog and radio-frequency-to-lightwave chips for optical networking, data centers and defense radar. Its July-quarter revenue was $342.2m, up 35.8% year on year, with gross margin expanding to 58.3% from 53.7% and a record 1.6-to-1 book-to-bill; guidance calls for $415-425m. The shares are down 29.9% over three months. At 30.9x trailing and 27.2x forward gross profit, MACOM is the one name here whose numbers accelerated while its price did the opposite.

Coherent, a $55.6bn laser and photonics manufacturer with more than 51,000 employees, is the cheap end of the same rack: June-quarter revenue of $2.046bn grew 33.7% with a fourth consecutive quarter of margin expansion, to 38.5%, and it trades at 20.8x trailing gross profit.

Against those anchors, Credo at 47.3x trailing gross profit has barely moved — it was 49.8x on 21 May — while trailing gross profit grew 25.4% over the same three months. Its 37.3x forward earnings embeds the guided acceleration. Astera Labs at 54.1x trailing gross profit has come down from 67.1x in May but still costs 57% more per dollar of gross profit than the 34.4x of 20 February, on 72.1x forward earnings.

The week the discount rate moved

Between 17 and 21 August the whole rung sold off together, and copper got no shelter: Credo fell 18.5% and Astera Labs 11.0%, against Lumentum's 10.6% and Coherent's 17.6%. Fabrinet, which assembles optical modules, fell about a quarter after reporting record revenue of $1.316bn and guiding higher. The S&P 500 tracker lost 1.0% over the same four days. The mechanism was rates and demand narrative, not order books: the 30-year Treasury yield hit a 19-year high above 5.33% as a Treasury buyback plan failed to hold it, and a Wall Street Journal report of disappointing OpenAI second-quarter results hit AI infrastructure names the same session. Astera Labs' uptrend weakened in early August, its shorter moving average flattening toward the longer one, and has not recovered since.

The setup

Where it stands — Both interconnect leaders are building optical businesses, so the copper-versus-fiber split no longer separates them; MACOM's numbers and price point opposite ways.

Would confirm — Credo's fiscal first quarter shows optical DSP and ZeroFlap revenue disclosed as a growing line with gross margin held near 68%.

Would invalidate — Credo's top-customer share climbs above 34% while sequential growth stays below 10%, showing one program, not a broadening base.

Watch next — Credo reports fiscal first-quarter results for the quarter ended 1 August after the close on 1 September 2026.

Valuation — Credo 47.3x trailing and 25.7x forward gross profit; Astera Labs 54.1x and 34.4x; MACOM 30.9x; Coherent 20.8x.