According to Tom's Hardware and a UDN report, Lumentum CEO Michael Hurlston told the RAISE AI Summit in Paris that the indium phosphide (InP) squeeze behind every AI data center laser will be worse than the DRAM/NAND shortage. Lumentum's five InP fabs are still shipping over 30% below customer demand, prompting Nvidia to commit $2 billion each to Lumentum and Coherent in March.
Why is Lumentum's CEO calling the indium phosphide shortage worse than the memory crisis?
At the RAISE AI Summit in Paris, Lumentum CEO Michael Hurlston delivered a blunt warning about the compound semiconductor that underpins every laser inside an AI data center. According to Tom's Hardware, Hurlston said "indium phosphide, the compound semiconductor behind every laser in an AI data center, is heading into a supply squeeze worse than what we've already seen with DRAM/NAND" (E1).
A separate report from UDN (money.udn.com), dated August 2, 2026, corroborates the same warning, stating that Hurlston told the Paris summit the bottleneck for future AI infrastructure growth lies in indium phosphide (InP), and that the shortage is expected to be more severe than the current memory industry shortfall (E6). Two independent outlets covering the same speech converge on one claim: InP, not memory, is now framed as the tighter supply constraint for AI buildouts.
What is driving exponential demand for indium phosphide lasers in the AI era?
The scale of the demand shift is what separates this shortage from prior cycles. Per Tom's Hardware, Hurlston described how "telecom customers bought lasers in the hundreds, while Nvidia and the hyperscalers are asking for hundreds of millions" (E3).
The UDN report frames the same shift structurally: nearly every component inside future AI infrastructure will require InP-process lasers, and as a result market demand is expected to grow by several multiples (E7).
| Buyer type | Historical/current order volume |
|---|
| Telecom customers | Hundreds of lasers |
| Nvidia and hyperscalers | Hundreds of millions of lasers |
How big is the gap between Lumentum's capacity and customer demand?
Lumentum is not a small player sitting on the sidelines — it already operates five indium phosphide fabs. Yet according to Tom's Hardware, "While Lumentum runs five indium phosphide fabs, it's still shipping more than 30% below what customers want" (E4). That gap — over 30% short of demand despite five dedicated fabs — is the clearest quantified evidence in this story of how far supply lags behind AI-driven orders.
Why can't the world's two most advanced suppliers meet demand?
The shortage is not a matter of an underdeveloped supply chain catching up — it involves the industry's most capable players already running short. UDN reports that Lumentum and Coherent are currently the most technologically mature and advanced suppliers of InP-based optical components globally. Even so, with AI data centers set to require large volumes of InP optical components, Hurlston stated that Lumentum and Coherent alone cannot satisfy the massive demand from Nvidia and other AI companies (E9).
How is Nvidia using investment to address the shortage?
According to Tom's Hardware, Hurlston said Nvidia's decision to fund Lumentum and its biggest competitor at the same time "was a response to exactly that" supply squeeze (E2). The specifics: in March, Nvidia wrote $2 billion checks to both Lumentum and Coherent — the two suppliers that together make most of the world's high-speed datacom lasers — with purchase commitments and future capacity access attached to both deals (E5).
| Recipient | Nvidia investment | Attached terms |
|---|
| Lumentum | $2 billion (March 2025) | Purchase commitments + future capacity access |
| Coherent | $2 billion (March 2025) | Purchase commitments + future capacity access |
Which Taiwanese optical component makers stand to benefit?
On the supply-chain side, UDN reports that institutional investors (法人) are optimistic that Taiwan-listed optical laser component names — Prime World International (波若威, 3163), Yuan Ze Photonics/Accton-affiliated HG Tech (華星光, 4979), and Optowell (光環, 3234) — could benefit from the InP supply chain squeeze (E8).
What this means
The evidence lays out a supply chain under structural strain rather than a temporary bottleneck. Lumentum already runs five InP fabs and is still shipping more than 30% below customer demand (E4); it is also, alongside Coherent, one of the two most advanced InP suppliers in the world, yet Hurlston says the pair cannot meet Nvidia and other AI firms' volumes even at that technological ceiling (E9). Nvidia's response — $2 billion checks to both leading suppliers with purchase commitments and capacity access attached (E5) — reflects an attempt to secure supply directly rather than wait for capacity to catch up organically. Set against Hurlston's own comparison of order volumes moving from hundreds of units for telecom customers to hundreds of millions for hyperscalers (E3), and his explicit forecast that the InP squeeze will exceed the DRAM/NAND shortage in severity (E1, E6), the picture is one where even the top-tier suppliers and direct capital injection from the largest buyer have not closed the gap.