The old new thing: Cisco and retro tech are -2-

"I think it's less that old equipment is now more in vogue, and more that formerly 'sleepy' low-growth end markets are now seeing higher demand," he said, referring to networking systems Cisco originally made for telecoms.

Chokepoints of the AI supply chain

At a plant in Sherman, Texas, roughly the size of a football field, Cisco competitor Coherent makes lasers for iPhones - and for data centers.

According to the company, the facility is home to the largest-volume production site in the world for the manufacturing of 6-inch indium phosphide - a semiconductor material used in lasers - one of the most critical chokepoints currently in the AI supply chain.

The material is essential for turning electrical signals into laser light. The indium phosphide-based lasers are used inside optical transceivers, which connect networking equipment and transmit data across data centers. With demand for its data-center components surging, Coherent reported revenue of $7.1 billion in the fiscal year ending June 2026, up 114% from its fiscal year ending June 2022, the year the AI frenzy began. Lumentum, a Coherent competitor, generated $3 billion of revenue in the year ending June 2026, up 76% from its fiscal year ending June 2022.

"Wherever you look in the data center, between the racks, within the rack, data center to data center...we have the entire portfolio of technologies," Sanjai Parthasarathi, chief marketing officer of Coherent, told MarketWatch.

The company, which originally focused on photonics for industrial applications and eventually moved into telecommunications, is now focusing on AI.

And with a mix of Nvidia's funding, along with a $50 million federal grant from the U.S. Chips and Science Act, among other funding sources, Coherent plans to double the size and quadruple the production capacity of the site in Sherman.

Coherent reported that 79% of its quarterly revenue came from its data-center and communications businesses for its June quarter, which Baptista Research's Majumdar said is a case in point that AI has created a "massive need to move data faster and more efficiently between chips, servers and data centers."

"What is really happening is that some of these companies spent decades building things like fiber networks, optical technology, networking expertise and manufacturing capacity," he said. "A lot of that infrastructure was not especially exciting to investors for years," he added.

But now, there's been a "revaluation of infrastructure that is difficult and expensive to replicate," he said.

Jeff Hecht, a science and technology writer and author of "City of Light: The Story of Fiber Optics," explained to MarketWatch: "Corning will supply the glass, and other people [like Coherent and Lumentum] would supply the lasers, and then Cisco provides the software and the transmission electronics, and some place like Lumen will pick up on other things."

The AI supply chain is effectively a "whole communication system that's built around glass fibers and lasers that are producing the light to go through the glass fibers," he said.

See also: Building U.S. data centers is getting so expensive that AI companies are moving overseas

-Hannah Pedone

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09-19-26 0830ET