Cisco Offers Embedded Optical Interconnect Exposure Without Pure Play Risk
Optical interconnects include optical interposer developers and legacy networking providers. POET and Cisco represent two of these optical interconnect companies.
POET is exposed to optical interconnect systems dependent on a shift in compute design to be embedded throughout hyperscaler infrastructure. Cisco is exposed to optical interconnect systems already embedded throughout hyperscaler infrastructure. The difference is not optical interconnect exposure, but whether that exposure is embedded and how that translates into valuation.
Pure play optical interconnect exposure is a timing trade
POET represents pure play optical interconnect exposure through its optical interposer, a developing technology that has not yet been embedded throughout hyperscaler infrastructure. Pure play optical interconnect exposure introduces three dependencies required for deployment at scale. First, adoption depends on optical interconnect systems near the GPU moving from optional to necessary. Second, commercial scalability depends on integration within hyperscaler infrastructure. Third, progression depends on continued access to capital markets during development cycles.
Cisco’s exposure to optical interconnects is embedded
Cisco represents embedded optical interconnect exposure through its acquisitions of Acacia and Luxtera within its existing networking business. Acacia supplies high speed optical transceivers for intra data center traffic. Luxtera provides silicon photonics based optical modules for high density data movement within hyperscaler infrastructure. These acquisitions position Cisco within optical interconnect systems embedded throughout hyperscaler infrastructure.
Different investment structures
Although POET and Cisco represent exposure to optical interconnects, they do so in different ways. POET represents pure play optical interconnect exposure dependent on adoption, integration, and continued access to capital, in which optical interconnects must independently justify valuation.
Cisco represents embedded optical interconnect exposure through its acquisitions of Acacia and Luxtera within its existing networking business. This exposure is already embedded throughout hyperscaler infrastructure and reflected in Cisco’s existing networking valuation.
Why this matters for hyperscaler infrastructure scaling
This valuation asymmetry reflects where POET and Cisco sit within hyperscaler infrastructure scaling. Cisco captures value from optical interconnect systems embedded throughout hyperscaler infrastructure. POET remains dependent on adoption, integration and continued access to capital to capture value. As hyperscaler infrastructure scales, value shifts toward optical interconnect systems already embedded in hyperscaler infrastructure.
Embedded vs standalone exposure
The real difference is not between companies building optical interconnects, but between those already embedded throughout hyperscaler infrastructure and those not embedded. Cisco is exposed to optical interconnect systems already embedded throughout hyperscaler infrastructure and capturing value. POET is not.
The decision is therefore less about optical interconnect exposure itself, and more about whether that exposure is embedded or not and how it translates into valuation.
Disclosure: This article reflects the author’s personal analysis and opinions and is not investment advice. The author does not hold shares in Cisco Systems (CSCO) or POET Technologies (POET) at the time of writing. Images used are independent illustrative renderings and are not official Cisco Systems or POET Technologies promotional materials.
RISK PROFILE
Valuation Asymmetry: Cisco offers embedded optical interconnect exposure already capturing value. POET represents pure play optical interconnect exposure not yet embedded. The risk is buying pure play exposure not yet embedded versus embedded exposure already capturing value.
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