Summary:
Photonics and optical networking are emerging as key beneficiaries of the AI data-centre boom as demand for high-speed data transmission drives greater use of fibre and optical technology. Indian players such as HFCL, Sterlite Technologies and Tejas Networks are gaining from rising data-centre and hyperscaler demand, though valuations and execution risks remain high.
Every few years, the market finds a new physical bottleneck to obsess over. First it was cloud computing capacity, then it was memory chips. Now attention has shifted to something more fundamental: the wires and fibres that move data between machines. Photonics and optical networking, the science of using light instead of electricity to transmit information, has quietly become one of the most talked about themes of 2026, both globally and in India.
The Global Trigger
The driver behind this rally is straightforward. Artificial intelligence data centres need to move enormous volumes of data between thousands of GPUs at extremely high speed. Copper wiring struggles beyond a point on distance, power draw and bandwidth, which is why optical connections are replacing it inside modern data centres. Goldman Sachs estimates the total addressable market for optical networking will expand more than nine times, from roughly $15 billion to about $154 billion by 2028. Nvidia has already backed this shift with real money, committing $2 billion each to Lumentum Holdings and Coherent Corp, taking its total photonics-related investment to $4 billion. The five largest US technology companies are together expected to spend between $660 billion and $690 billion on data centre infrastructure in 2026 alone, nearly double what they spent a year earlier.
The Indian Connection
India is not a bystander in this story. Domestic optical fibre and networking companies have moved from being steady, low-growth telecom suppliers to becoming AI infrastructure plays almost overnight. HFCL Ltd now holds a record order book of ₹21,200 crore, helped by rising demand from data centre interconnect solutions, a segment management expects will add close to ₹400 crore in revenue in FY27 and ₹800 crore the year after. Sterlite Technologies, headquartered in Pune, secured a large multi-billion dollar contract from a global hyperscaler and saw its order book double to ₹7,687 crore in FY26. Tejas Networks, backed by the Tata Group, has been gaining traction in 400G and 800G optical networking equipment, though its order flow remains more uneven since a large chunk historically came from BSNL.
| Why data centres need so much more fibreIndustry estimates suggest an AI-focused data centre can require anywhere between 10 to 36 times more optical fibre than a conventional cloud data centre of similar size, because of the dense, high-speed interconnects needed between GPU clusters. This single number explains why fibre order books across Indian manufacturers have expanded so sharply through 2026. |
What the numbers show
| Company | Order book (FY26) | 1-year return | Core business |
| HFCL Ltd | ₹21,200 crore | ~192% | Optical fibre cable, data centre interconnect |
| Sterlite Technologies | ₹7,687 crore | ~385% | Optical networking, hyperscaler fibre contracts |
| Tejas Networks | ₹1,514 crore | Volatile, order-dependent | 400G/800G optical networking equipment |
The Other side of the story
None of this comes without risk, and that needs to be said plainly. Several of these stocks have already run up several hundred percent within a year, valuations have stretched well beyond historical averages, and trading in some counters has been volatile enough to hit both upper and lower circuits within the same fortnight. Global peers such as Lumentum and Coherent trade at price-to-earnings multiples well above 200, a level that assumes years of flawless execution. Order books are strong, but order books are not the same as delivered revenue, and any slowdown in hyperscaler capital spending or delay in project execution can hit sentiment quickly in a sector this richly valued.
The Takeaway
Photonics and optical networking is shaping up as a genuine structural theme rather than a passing rally, backed by real capital expenditure from global technology companies and real order books at Indian manufacturers. Whether it becomes the next big multi-year boom or a sharp momentum trade that cools off will depend on how well execution keeps pace with the expectations already priced into these stocks. For now, this is a space worth tracking closely rather than chasing blindly.
