Nvidia Corp. today announced plans to invest in Lumentum Holdings Inc. and Coherent Corp., two publicly traded suppliers of optical networking equipment.

Each company is set to receive $2 billion. Nvidia stated that the sum includes a “multibillion-dollar purchase commitment and future access” rights to certain laser components. In the case of Coherent, the deal also encompasses other optical networking products.

Last March, Nvidia debuted two data center switch families that use an emerging packet transmission technology called co-packaged optics, or CPO. Lumentum and Coherent both make laser components for CPO systems. In September, the former company launched an effort to grow its CPO component production capacity.

The servers that make up artificial intelligence clusters are connected by fiber-optic cables. Switches turn packets into light before it’s sent through a fiber-optic cable and then turn the light beam back into digital data. Historically, the task was performed by standalone devices called pluggable transceivers.

The CPO technology that Nvidia integrated into its switch portfolio last year removes the need for standalone pluggable transceivers. It integrates a pluggable transceiver directly into switches, which reduces the amount of hardware that data center operators must buy. The technology also reduces network power usage.

CPO switches use miniature laser emitters to turn data into light that can be transmitted over fiber-optic cables. Lumentum, the first company in which Nvidia has invested, is among the world’s top suppliers of CPO-optimized laser modules. Its emitters generates 1311-nanometer light beams and include a temperature management mechanism that helps optimize network performance.

Lumentum, which generated $665.5 million in revenue last quarter, also makes other network equipment. It develops traditional pluggable transceivers and devices called optical circuit switches that help optimize AI clusters’ network traffic. Additionally, Lumentum supplies industrial lasers geared towards tasks such as welding together metal parts.

Coherent also makes a mix of industrial and data center lasers. It recently introduced a laser emitter optimized specifically for CPO systems. It sells the module alongside related equipment such as fiber optic cables.

The company is also active in certain adjacent markets. It sells a line of devices that help network equipment  suppliers speed up product development initiatives. Its offerings in that category include so-called optical spectrum synthesizers, which engineers can use to simulate different types of data traffic in optical networks.

Coherent and Lumentum will use the funding from Nvidia to support research and development efforts. They’re also working to expand their stateside manufacturing capacity. The companies’ shares jumped more than 10% on the news in today’s trading session.

Image: Nvidia