Nvidia Backs Coherent’s Texas Photonics Expansion to Power AI Data Centres

Picture a vast AI data centre humming away somewhere in the American Southwest. Thousands of Nvidia GPUs are crunching through model training runs, but the thing holding it all together isn’t silicon. It’s light. That’s the idea behind Nvidia’s major push into photonics — and it’s just taken a very concrete step forward in North Texas.

Nvidia CEO Jensen Huang travelled to Sherman, Texas, this month to mark the ground-breaking on an expanded manufacturing facility operated by photonics company Coherent Corp. Standing alongside Coherent CEO Jim Anderson and local officials from the City of Sherman, Huang’s presence underlined just how seriously Nvidia is treating optical interconnects as part of its AI infrastructure strategy.

What Coherent Actually Does — and Why It Matters

Coherent Corp, listed on the New York Stock Exchange under the ticker COHR, makes lasers, optical components and compound semiconductor materials. Its products are used in telecommunications, industrial systems and, increasingly, inside the data centres that run the world’s most demanding AI workloads.

The Sherman site is at the centre of this push. Coherent describes it as the world’s first volume production facility for 6-inch indium phosphide wafers — though that’s a marketing claim the company makes itself, and it can’t be independently verified from external sources. Indium phosphide, or InP, is a compound semiconductor used to build photonic integrated circuits and high-speed laser devices. These are the components that let data travel between AI chips and servers using pulses of light rather than electrical signals through copper cables.

The difference matters. As AI models grow larger and data centres become denser, copper connections struggle to keep up. Optical interconnects move data faster, over longer distances, and with better energy efficiency. That’s not a niche concern — it’s becoming a basic requirement of modern AI infrastructure.

Jim Anderson, CEO of Coherent, said: “AI infrastructure runs on more than compute. It runs on light.”

The Scale of Nvidia’s Commitment

Nvidia isn’t just showing up for a photo opportunity. The company has made a multibillion-dollar purchase commitment for Coherent’s advanced laser and optical networking products, and has secured future access and capacity rights at Coherent’s facilities under a multiyear strategic agreement.

On top of that, Nvidia is investing around $2 billion — around £1.6 billion — directly into Coherent to support research and development, future manufacturing capacity and operations at its US-based facilities. The agreement covers advanced optics technologies and is designed to support what Nvidia frames as the next generation of AI infrastructure.

That’s a serious bet. And it’s not just private money.

CHIPS Act Funding and Job Creation

The US federal government is also in the picture. Coherent has signed a letter of intent with the US Department of Commerce for up to $50 million — around £39 million — in direct funding under the CHIPS and Science Act, the legislation passed to rebuild domestic American semiconductor manufacturing capacity.

This follows a preliminary agreement announced in late 2024 for up to $33 million in CHIPS Act funding for modernisation and earlier expansion work at the same Sherman site. The new letter of intent goes further, specifically targeting the scale-up of 6-inch InP wafer production.

The Semiconductor Industry Association publicly backed the move, describing it as a strategic investment in the kind of photonics capacity that underpins both AI and communications infrastructure.

Job creation is a central part of the case for public funding. At full completion, the expanded Sherman facility will likely support more than 1,000 jobs in total, with over 550 of those being direct advanced manufacturing, engineering and technical roles. Construction and related positions make up the remainder. Local officials in Sherman have welcomed the expansion as part of a broader effort to position North Texas as a major semiconductor and photonics manufacturing corridor.

A separate figure of $650 million for the overall Sherman expansion has been cited in City of Sherman social media posts and local announcements. That number hasn’t yet been corroborated in federal filings or detailed company financial disclosures, so treat it with some caution.

Questions Worth Asking

Not everyone takes large public subsidies for established technology companies at face value. Some observers raise questions about whether CHIPS Act grants and incentives directed at companies of Coherent’s scale represent the best use of federal money — though no specific formal criticism of this particular project has emerged from official sources.

There are also broader questions about the environmental footprint of expanding semiconductor manufacturing. Chip fabs and photonics facilities are energy and water intensive. No specific environmental controversy around the Sherman site has been documented in available material, but it’s a fair question to ask as the US semiconductor buildout accelerates.

What Happens Next

The ground-breaking in Sherman marks the point at which commitments become construction. Additional wafer fabrication equipment and cleanroom capacity will be installed as the facility scales up. The timeline for full production ramp hasn’t been specified in detail, but the CHIPS Act letter of intent and Nvidia’s purchase commitment suggest both sides are motivated to move quickly.

For Nvidia, getting more optical interconnect capacity into the supply chain is directly tied to its ability to sell and deploy ever-larger AI systems. For Coherent, the Nvidia relationship and federal backing give the Sherman facility a level of demand certainty that most manufacturers can only dream of.

What This Means for Kent Residents

There’s no direct connection between Coherent’s Sherman facility and Kent, but the expansion feeds into the global supply chain that keeps AI-powered services — cloud platforms, AI assistants, online tools — running reliably for everyday users across the UK. Better supply of high-performance optical components can help ease bottlenecks in data centre infrastructure, which over time can support the performance and availability of the digital services that Kent residents and businesses use daily. UK photonics research institutions and tech firms that work in adjacent areas of the supply chain may also find growing global demand for these skills worth watching.