Nvidia to invest $4 billion in Lumentum, Coherent to bolster AI processors

The world's leading chip-making giant Nvidia is planning to invest in another telecommunication company to boost business.

Nvidia announced that it will invest $2 billion each in photonic product makers Lumentum Holdings and Coherent as it looks to bolster its data center chips with technology that can better cater to the growing need for faster AI processors.

Shares of Lumentum and Coherent were up over 7% in premarket trading after the announcement on Monday.

At its most recent earnings conference, Nvidia executives said the company would use its large cash reserve to invest in the AI ecosystem and help boost the output of models.

Light-based and photonics technology has emerged as a popular choice for chipmakers looking to increase the speed of their chips in an effort to cater to higher inference requirements.

The tie-ups include multibillion-dollar purchase commitments from Nvidia and future capacity and access rights to advanced laser and optical networking products from both Lumentum and Coherent.

The investments will help the companies support research and development, capacity, and operations as they build out U.S. manufacturing capabilities.