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Everyone is watching $LITE, $COHR, $AAOI, $AXTI run. The photonics rotation is real and the AI capex thesis is well understood by now.
What isn't talked about enough is what comes after 800G.
Silicon photonics (what most of the above ship today) and InP both hit hard physical limits beyond 800 Gbps. The AI buildout doesn't stop there. Nvidia's NVLink 6 is already targeting 3.6 Tb/s per GPU. The whole stack has to move to 1.6T then 3.2T. Current materials can't get you there cleanly.
That's where TFLN comes in.
Thin-film lithium niobate isn't a new material, LN has been in telecom for 60 years. What changed is the fabrication. A smart-cut process now lets you bond a nanometer-thin film of LN onto a substrate, giving you all the electro-optic properties of the crystal in a form dense enough to build photonic integrated circuits. The result: modulators running 100+ GHz bandwidth, sub-1V drive voltage, and propagation loss under 0.1 dB/cm. Silicon works by pushing carriers around to change the refractive index. TFLN uses the Pockels effect, the field changes the index directly, no carriers, no lag, no extra heat. That's a generational gap in performance at the speeds AI infrastructure needs.
TFLN doesn't replace InP either. It needs a laser source from InP or a VCSEL. It sits on top of it.
The problem is supply. Nearly all TFLN wafers in the world come from one company: NANOLN, based in Jinan, China.
Raytheon literally said this out loud in their Mastermind AFRL contract filing. They described TFLN wafer production as dominated by a Chinese manufacturer and selected Gooch & Housego ($GHH, LON) to build the first domestic US production line in Ohio.
CPO (co-packaged optics) is the architecture pulling this forward. CPO integrates optical engines directly onto the switch or GPU package, cutting signal loss and power vs pluggable modules. CPO ports are forecast to be 30%+ of all 800G and 1.6T deployments in 2026-2028. At those speeds the modulator of choice converges on TFLN.
The stack is: hyperscaler capex -> CPO adoption -> 1.6T modulator demand -> TFLN wafer supply crunch -> whoever controls domestic production.
$AXTI is the InP layer. $GHH is the TFLN layer. Same thesis, different spot.
$GHH is a London-listed, small cap, and illiquid. Not a momentum trade. But if the CPO buildout plays out the way the optical interconnect market is projecting, the wafer supply chain gets stress-tested, then this Western producer with a Raytheon-backed production line looks very different at that point.
On top of that, $GHH is an undervalued, profitable and growing aerospace/defense/life sciences/telecom/industrial supplier.
Small position, long time horizon, high conviction on the structural setup.
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