How the AI Boom is Transforming Specialty Glass and Optical Connectivity Markets

Technological Innovations Driven by AI

Corning's innovations in fiber cable and connectors are driving significant customer wins for AI datacenter builds. Generative AI is impacting their optical communications and infrastructure business, leading to new user interfaces. The fundamental change in compute driven by Gen AI is boosting their optical connectivity solutions, contributing to sales growth.

"Now our ability to integrate innovations across fiber cable and connectors to trade end-to-end solutions is a unique competitive advantage and we're accumulating significant customer wins for upcoming AI datacenter builds." --- (GLW, earning call, 2024/Q1)

"When you look at AI servers or any of these different kinds of applications, you see tremendous innovation in the high-bandwidth memory." --- (AMAT, earning call, 2024/Q2)

"Generative AI has the potential to impact many of our market access platforms because it will impact both the generation of the models and use of the models in our infrastructure based business optical communications as well as causing refresh cycles on the user interface as well as developing of entirely new user interfaces using this technology that we are already engaged on with a number of leaders in the space." --- (GLW, conference, 2024/05/21)

"But the majority is coming out of the enterprise piece as you see the fundamental change in compute-driven by Gen AI and its related networking requirements." --- (GLW, earning call, 2024/Q2)

"For the third quarter, we expect sales to grow to approximately $3.7 billion, driven primarily by our optical communications business including the continued adoption of our new optical connectivity solutions for Gen AI products, which we expect will more than offset the expected slowdown in the US Class 8 truck market.We expect EPS in the range of $0.50 to $0.54, with EPS growing three times the rate of sales." --- (GLW, earning call, 2024/Q2)

AI-driven Demand for Specialty Glass

AI-driven demand for specialty glass is surging, driven by the adoption of new optical connectivity products for generative AI, increased need for premium smartphone cover materials, and the rise of AI infrastructure challenges requiring smaller, denser cables. This trend is further supported by the rapid securing of fiber and bandwidth by technology companies.

"The sequential sales increase is driven primarily by the continued adoption of new optical connectivity products for generative AI in Optical Communications more than offsetting the expected slowdown in the North American Class 8 truck market." --- (GLW, press release, 2024/07/30)

"That's going to push demand on all those functions. Got it. Does quickly on that AI topic, does Edge AI and just the adoption of AI in smartphones and PCs, Does that mean anything for WFP or is it too early to make that call?" --- (AMAT, conference, 2024/06/06)

"Sales in the first quarter were $454 million, up 12% year-over-year, driven by strong demand for our premium smartphone cover materials, as well as semiconductor-related products." --- (GLW, earning call, 2024/Q1)

"Smaller, denser cables are ideal for solving the AI-driven infrastructure challenges of carrier and data center customers." --- (GLW, press release, 2024/04/30)

""Lumen is the network that delivers AI. The rise of AI is driving technology companies to quickly secure fiber and bandwidth before their competition," said Kate Johnson, president and CEO, Lumen Technologies." --- (GLW, press release, 2024/08/01)

Supply Chain Impacts of AI Boom

Supply chain constraints are a concern for AI services, as highlighted by Microsoft, while Google questions whether improved supply conditions are driving AI growth. This indicates that the AI boom is significantly impacting supply chain dynamics, particularly in optical connectivity components.

"And, you know, do one of the questions we get is, should we be, somewhat handicapping, you know, the the forward Azure AI services estimates due to supply constraints?" --- (MSFT, conference, 2024/05/21)

"Is the uptick because supply is getting easier to get, or do you see more opportunities with the available supply to really fuel AI?" --- (GOOG, earning call, 2024/Q1)

Market Growth Projections

Market growth in specialty glass and optical connectivity is projected to be stable and growing, driven by secular trends and innovation. Companies like Applied Materials and Corning are positioned to capture significant growth, with expectations of delivering incremental profit and cash flow as demand increases.

"They probably got a little bit ahead of the demand function. But if you view those end markets at growing at 7.5% or whatever percent per year, then there's probably a little bit to absorb, but we think that will be a stable and growing market going forward." --- (AMAT, conference, 2024/06/06)

"And we continue to innovate new product sets tied to secular trends to drive growth above market levels.Third, as we capture this growth, we expect to deliver powerful incremental profit and cash flow. We have the required capacity and technical capabilities in" --- (GLW, earning call, 2024/Q2)

"And it just goes along. If you ask is this market growth or is it technology?" --- (AMAT, conference, 2024/06/06)

"Weeks continued, "We're off to a great start with our ‘Springboard' plan. We've positioned the company to capture significant growth – with powerful incremental profit and cash flow – as cyclical factors and secular trends converge to drive demand for our capabilities."" --- (GLW, press release, 2024/07/30)