STMicroelectronics N.V. ($STMPA)

Ladies and gentlemen, welcome to the ST Cloud AI Update Conference Call and Live Webcast. I am Maura, the Chorus Call operator. [Operator Instructions] The conference has been recorded. [Operator Instructions] At this time, it's my pleasure to hand over to Jerome Ramel, EVP, Corporate Development and Integrated External Communications. Please go ahead.

Thank you, Maura. Thank you, everyone, for joining the ST Cloud AI Update Conference Call. Hosting the call today is Remi El-Ouazzane, President, Microcontrollers, Digital ICs and RF Product Groups. This live webcast and presentation materials can be accessed on ST Investor Relations website. A replay will be available shortly after the conclusion of this call. This call will include forward-looking statements that involve risk factors that could cause ST results to differ materially from management expectations and plans. We encourage you to review the safe harbor statement contained in the presentation and also in ST's most recent regulatory filing for a full description of these risk factors. Also to ensure all participants have an opportunity to ask questions during the Q&A session, please limit yourself to 1 question and a brief follow-up. I'd like now to turn the call over to Remi El-Ouazzane.

Good morning, and good afternoon, everybody. Today, I'm going to share with you some of our insights into tomorrow's advanced data centers and AI clusters, and how our company, ST, is positioned to contribute to them. I'm going to focus, both on the optical interconnect and power technologies. In this presentation, you will see a lot of compute power and interconnect numbers, but it's good to remind ourselves that this is not just about making ChatGPT faster, high-performance computing as a potential to revolutionize society by accelerating advancements across various fields, be it in health care, in climate science or in agriculture, and this is really what it's all about. I will skip the forward-looking information and go straight into the first half of this presentation. A handful of global hyperscalers drive the explosive AI data center growth, and they are actually projected to invest more than $700 billion of CapEx in '26 and in excess of $1 billion in 2030. Servers are creating a structural, and I may say once-in-a-lifetime growth opportunity, and you will see why ST is positioned to sharply increase its content, and as such, its revenue in data centers. Indeed, it's a combination of a lot of technological differentiation and well-positioned products that is going to allow us to go and engage on that market and support its growth. Before we get going into some amount of details, we wanted to go and put some numbers behind the opportunity. And I think at this stage, there is no better way but to talk about our SAM per gigawatt of infrastructure. We see around $230 million. That number is approximately in nature. Should you write to $200 million or $250 million, I don't think it will change much. What matters here is the breadth of our offering this $200 million of SAM is backed up by about 400 products we have that are tuned to address the AI data center business. We can address every critical step that is actually relevant to us as an IDM that is power conversion, high-speed connectivity, control, monitoring and obviously, security. Each new AI campus built at this scale or each step up in rack power and rack bandwidth will automatically translate into more potential dollar opportunities for our company. Let me deep dive into the first part of my presentation that is all related to power. As you know, the rapid growth of AI workload is driving unprecedented power demands in modern data centers. As AI models become increasingly more complex, computationally intensive, the infrastructure supporting these workloads must evolve to deliver amazingly high power densities. We are coming from a world where traditional 54-volt power distribution system are absolutely reaching their physical and electrical limits. This legacy systems struggle to efficiently supply the massive power requirements of emerging megawatt-scale AI compute racks. And there are three main challenges that they're facing. One is a growing XPU compute, those chips are getting hungrier and hungrier from 500k watt -- from 500 watts to 1 kilowatt to 2 kilowatts to 3 kilowatts and more, delivering enough current at low voltages requires a massive amount of copper. Size and space is the second problem. The thicker the cables and the more conversion stage we have, essentially there's less room you have for actual GPU content in a rack. This actually goes against compute density, which itself goes against high TCOs -- higher TCOs and lower ROI. The last piece is thermal management. Every time you convert power, you lose efficiency, and efficiency in this world translate into heat, which themselves will require actually more power to cool down. It's a very vicious circle. So that's why to address those challenges, the industry, as you know, is actually moving to more or less 1 megawatt per rack. Why? Simply because by increasing the voltage to 800-volt in that case, the current required for the same power level is reduced, which in turn decreases resistive losses, for those who remember the physic classes and reduces the amount of copper cabling needed. This transition not only enhance energy efficiency, but will actually simplify the overall power infrastructure enabling more compact, more scalable data center designs that can actually meet the growing demand of AI workload, while actually reducing operational costs and quite importantly, environmental impact. Now to unlock 1 mega plus density, ST is putting a combination of its most advanced technology, be it silicon carbide and gallium nitride as well as our smart power processing like BCD using galvanic isolation. It's actually not really an upgrade. It is truly a revolution and for ST, in particular, ST, it's a massive inflection point, giving us a chance to become an active player in this power conversion market. If you go to the next slide. So what is the offering that we are supplying for this new paradigm? At the grid level, we leverage our leading position in wide bandgap material in the power supply unit to provide 800 volt AC to DC power shelf application using silicon carbide and GaN and setting the efficiency and power density baseline. Please do note that, that stage is actually sitting on a side car together with the BBU and also actually with circuitry that is allowing the rack to go and modulate itself as a function of GPU workload. When you got this 800 DC, and that is actually being sent to the rack, we provide compact solution within this intermediate bus conversion with high power density, leveraging notably our GaN FET, and allowing us actually to go from 800 volt down to 54 volt. Now I'd like to remind you that this is not new news. We actually announced that last October, together with NVIDIA. And we've announced that actually our team really designed two parts, hot swap protection circuit, which is actually a 1,200-volt silicon carbide. And the power convertor, the power converter in itself convert the 800-volt throughout the rack into this 54-volt needed by each server. And to provide this capability, like we've announced with NVIDIA a few months ago, we are providing actually a smartphone size footprint that uses actually 650-volt gallium nitride transistor in a stack half-bridge configuration. On the last slide, which is actually what you see on the extreme right on that chart, we are developing silicon-based digital multi-phase controllers and smart power stage down to sub-1 volt of 08 compliant with market-leading XPUs, but in that case, we can actually cover the complete data center power chain of three stages, embedding a full set of power technology into integrated solutions that support customers from the grid all the way to the core. And I insist that actually this transition from 54- to 800-volt is actually creating a very nice inflection point for us actually to go and shine. This is it for the power section of my presentation. I'm going to move now to the connectivity piece. Connectivity is the other critical lever to make AI factories truly scalable. As you know, in an AI data center, the interconnect is a high-speed data link, that allows thousands of GPU to, if you wish, talk to each other. It's efficiently directly drive energy consumed per bit and job completion time. It's actually a major cost and performance bottleneck. To build an AI infrastructure, you have to think on 3 dimensions: scale across, scale-up, scale-out. Scale across allows to connect different data centers over long distances. And you can actually make the statement that this has been opticalized, if I can use such verb. Scale-out is actually becoming fully opticalized, and it's actually all about connecting thousands of those racks together to work as one giant cluster. The next big battle which is actually an order of magnitude more connection is scale-up, and it's all about making a single rack more powerful by packing more GPUs. Today, scale-up is all about copper, but scale-up is actually we will talk about that migrating step-by-step to optical. All of these three directions, scale across, scale-out, and scale-up, the trend is the same. It's all about using light of fiber instead of copper to move massive amount of data in a very power-efficient manner and between AI server. This is where cloud optical interconnect and our Scale-X approach, as you see, the title become a key enabler for scalable AI infrastructure. Now let me show you what are the needed semiconductor pieces to address these trends because it is not a coincidence that actually we are becoming a very large player in this market. On both ends, maybe I should start with a recap on the way these things work. At both end of each and every fiber in data center, there is a transceiver that converts a signal on light into an electrical signal and vice versa. And most of the time is a pluggable object, which one would plug and onto switches or a server, allowing to build a flexible interconnect network. On the left-hand side, you can see that actually such transceiver is made of three important semiconductor components. To be truthful, I conveniently removed one, which is actually the DSP in charge of modulating the signal and other functions, but we do not actually produce such product. This is actually the property what Broadcom or Marvell essentially are doing. We have actually focused on the pieces, which are at the core of this optical engine and that actually where we're very engaged on. First is an MCU that controls the transceiver operation. Second is EIC, stands for electronic IC that is essentially driving the optical source in that case, a laser, but it is also actually amplifying signals in reception RX mode. And last is a photonics IC, often called a PIC, during the actual conversion of light to electronic and vice versa. If you actually zoom in on its NPO and CPO devices or construct, if you wish, NPO standing for near package optics and CPO standing for co-packaged optics, and it's all about devices or constructs that do bring the fiber directly to be packaged together with the GPU or your switch unit. It's a matter of fact for NPO and CPO. The exact same building blocks are being used, again, albeit in a different configuration and with different performance targets. So now, you can understand where we come from. ST provide to this system, all the related needed silicon technology, Silicon Photonics for PIC, BiCMOS from EIC, and I will tell you why BiCMOS is, by far, the best technology and tailored STM32 MCUs. Now let me show you more details on the ST technology behind that in the next slide. Silicon Photonics for PIC is designed to support 200 gigabit per second per lane and to scale to 800 gigabit per second and 1.6 terabyte per second optical interconnect. This is actually a PIC100 process, and this platform is manufactured in our Crolles 300-millimeter facility. You may wonder what's a big deal with your 300-millimeter. Using 300-millimeter and in that case for PIC100, a 14-nanometer class lithography give you 3 big huge advantages. First, better critical dimension control, which is actually the smallest element in your silicon design and a uniformity that 200-millimeter wafers cannot touch. Second, is a much higher yield and more predictable device performance, a key to CMOS digital yield levels. And last, and in this world of hyper demand 300-millimeter give you more dies per wafer, supporting the volume required by the hyperscalers and lowering cost per function. The second part of the shuttle is BiCMOS. So why BiCMOS, and you will have to trust me on this, and we can go into details, is just actually the figure of EIC, which is actually the frequency MAX of BiCMOS process is critical in an electronic IC device for high-throughput transceiver in the context of data centers and AI infrastructure. And here, we also have, by far, also on a 300-millimeter basis, we do have the best process on the planet. And last but not least, you need control. You need to be able to control this transceiver, and this is actually done with the microcontroller. You could ask me why a microcontroller, it's just to happen that actually the NVM provides super-fast or superior-latency in terms of loop closure and actually is favored as such, microcontrollers to be actually the engine control for pluggable or NPO or CPO. And here, obviously, the STM32 MCU, the world-leading MCU platform provide actually all the benefits to this market as well. So now you understand that we provide the possibility to integrate all of those things in advanced packaging technology so that actually can create an optical engine form. From process technologies to PIC, EIC, MCUs, to an optical engine, assembled by us end-to-end. As a matter of fact, I will challenge you to find another company able to do that today. So it's actually this combination of products and technology that give us a strong, scalable position across pluggable, NPO and CPO solutions. So you may have seen this morning that we've announced something, and what we announced this morning was twofold. First, we have announced that we are entering high-volume production for PIC100 in 300 millimeter for leading hyperscalers. Again, it's a combination of our technology platform, which is very unique with a backside implementation that is providing best-in-class performance for silicon nitride waveguide and build on a superior scale of our 300-millimeter manufacturing line. The combination of both give us a unique competitive advantage to support the AI infrastructure Super Cyber. We have planned capacity expansion that will more than quadruple our output by '27 versus today's basis, and we have further expansion plan in '28. This acceleration of capacity is not done in a vacuum. It's fully backed by long-term capacity reservation commitments from customers. The other thing that we have announced as well, which is worth noticing is that actually we are preparing the next step of the roadmap of our PIC100 process, which we call PIC100 TSV, through-silicon via. It's actually going to allow future generation of near-packaged and co-packaged optics solution that requires this level of integration to bring optics closer to the compute for AI, not scale across, not scale-up, but for AI scale-up. It would be difficult to not talk in this presentation today about something that we have announced a few weeks ago. We have recently expanded strategic collaboration with AWS through a multiyear, multibillion dollar commercial engagement, serving several product category. It's a major milestone to position us in the AI revolution. And this collaboration will establish ST as a strategic suppliers of advanced semiconductor technology and products that AWS will integrate in its compute infrastructure, enabling them, obviously, to provide better high-performance compute instances, reduced operational cost and obviously, the ability to scale compute-intensive workloads more effectively. ST will supply among other things, specialized capabilities across high-bandwidth connectivity, advanced microcontrollers for intelligent infrastructure management as well as analog and power ICs that deliver the energy efficiency required for hyperscalers, data center operations. It's because of this increasing demand in the AI data center. Our ability to provide the right products and technology portfolio. And last but not least, multiple deals we have closed over the past few months or are about to close that we've recently increased our revenue expectations, like Jean-Marc explained last week in San Francisco. In data centers, including cloud optical interconnect and power and analog for AI server with all those dynamics, we now believe we can be nicely above $500 million of revenue in 2026 and already well above $1 billion in 2027. A few words to conclude. ST optical technology are critical for AI infrastructure for pluggable transceiver, which amount for most of the market today, but also for the future fast-ramping near-packaged optics opportunities. Second, ST has also the power and a lot of technology, wide bandgap and silicon-based, galvanic isolation and smart power to address the 800-volt inflection point that is actually currently ongoing. We are, as usual, supporting collaboration with a broad ecosystem, including research labs, ODM, module vendors and as you've seen, the largest of all the hyperscalers. I repeat with the current market dynamics, we believe we can now achieve nicely above $500 million of revenue in '26 and well above $1 billion in '27. Thank you very much, and we are now ready to answer your questions.

[Operator Instructions] The first question comes from the line of Joshua Buchalter from TD Cowen.

I appreciate you guys hosting the presentation. I was hoping maybe you could provide some more granularity on the composition of the $500 million of business this year and greater than $1 billion next year. Any details you can give us on the split between Silicon Photonics, and power, and then even within power across high-voltage -- high medium voltage versus Stage 2?

Not really. In that case, sorry, we were, as we just announced this morning, we are ramping in production on Silicon Photonics, which will start to go and ramp in revenue this year. We are in volume shipment for power devices in the AC/DC conversion and in the battery backup units. The 800-volt DC architecture is pretty new, and it's not involved in volume production yet. As you know, we've built reference design and proof-of-concept board that we launched last year in October, together with our colleagues at NVIDIA. For local conversion, we are in production with key customers on the 50-volt to 12-volt. While we have validated samples for the part of the 12-volt to portions, it's not been yet put into production. So that give you a bit of lay of the land, but we have decided actually not to break it down at this stage.

Okay. Understood. And then if I could follow up, maybe you could speak to which sockets you think are most applicable to silicon carbide and GaN in particular in the medium and high voltage, how meaningful can that be? And how important is having compound semis to winning business across the power tree?

That's a great question. Clearly, if you look at the -- this new architecture from the high-voltage grid to 800 volt DC, you will see actually a fast adoption of SSTs, solid-state transformers, where actually silicon carbide will be critical. If you look at the 800 volt to 54 DC gallium nitride, I think, will play a critical role as a wide bandgap. GaN has unique properties that lead to a low output capacitance and lower on state resistance, which make it actually an excellent material when dealing with such a high frequency operation. The moment actually you land in the 12 volt down to 0.8, I think that you are in the land of silicon at this stage, most of the time, if not all the time, and we are moving away from wide bandgap material. We have not broken down the $230 per gigawatt of data centers. You know this slide that I've shown earlier, it's on purpose. We are actually looking at it holistically, and we have decided at this stage to not break it down.

Next question comes from the line of Sandeep Deshpande from JPMorgan.

My question is on -- first on the power side. There have been other players in the power market for the data center for many years before ST. What is the technology that ST is offering that differentiates itself and thus helps it to break into more market share in the power market today? And why, because ST was not a player in the power market before these recent announcements in any significant way?

Yes. Thank you, Sandeep. To this first part of the question, I -- you're absolutely right. I think that today, if you look at the 54 volt architecture, we have been actually marginal as the players. But this transition that is happening is giving us actually an opportunity to come in and if you allow me, I will leave it what I said earlier, because actually have come. I may not have come fully clear. First of -- the -- it's all about the amount of power density, you can pack in cubic -- in volume, if you prefer. And in that case, I believe, actually, we have something to put on the table. First, there is a hot swap protection circuit that is going to be critical as part of the 800-volt to 54-volt solution. And here, of 12-volt silicon carbide devices and on BCD, bipolar, CMOS, DMOS controllers with galvanic isolation are honestly the perfect fit for the technology. And we do believe actually we have a differentiation here, which has been proven to be the case. On the power converter, there are two elements. There is primary side, there's secondary side. So the primary side is all of what we do on gallium nitride that I've explained earlier. On the secondary side, there is a lower voltage gallium nitride transistor and lower voltage gate drivers that we master and actually our STM32 G4 microcontrollers that we can actually package together to provide actually the appropriate solution for the secondary side. We -- those two stages what I've explained, the hot swap part and the power conversion part backed up by our silicon carbide and gallium nitride and MCU technology, honestly, we are quite competitive. It's just so happened that before they were not really needed because actually, we are getting into the server rack at 54 volt, right? Because actually those racks were consuming far less power. But this opportunity that is actually popping up is creating an inflection point that -- like I said, I insist on the word inflection point that give us another opportunity to play in and to compete. I think...

And in that -- sorry, and just one quick follow-up. On this $230 million market that you're talking about in 1 gigawatt in the data center. How much of the SAM is ST actually addressing today in terms of market share, based on your AWS win and any other wins you've already had?

We have not documented that. We have focused on our SAM and -- sorry, you were asking me -- let me rephrase because I may have misunderstood your question, Sandeep. Are you asking me what is the SAM of the 1-megawatt rack?

No, I'm asking you in that $230 million of that SAM. Your SAM is $230 million in the 1 gigawatt rack, right? That is what you are saying?

Yes. Go ahead.

And in that $230 million, how much are you already addressing? And because there's some share you have and some share you still have to take, right?

No, I understand actually. You could assume actually by this year in terms of product availability. By this year, we can cover the entire $230 million in terms of product availability.

The next question comes from the line of Adithya Metuku from HSBC.

Can you hear me?

Yes.

Just two questions, please. Firstly, just a clarification. When you have these AICs and PICs, do they tend to come from the same vendor in a transceiver or in a CPO. And also, could you talk a bit about what market share you intend to have, maybe with a medium-term view or a long-term view in PICs with your technology and with PICs as well with [indiscernible] you have?

Okay. That's a very good question. There is technically -- technologically, no forcing function that forces you to use the same vendor for the microcontrollers, the EIC and the PIC. What we see more often assuming no supply constraints whatsoever is more a best-of-breed approach. And so you have to compete towards the best microcontrollers, the best photonics ICs and the best electronic ICs, I want to make that point first and foremost. Obviously, that dynamic is a bit changing for the next 2 to 3 years because for those technologies, we can be guaranteed that actually there will be a lot of supply challenges in the industry. And obviously, that gives us, in exchange, an ability to provide to our customers a better service when we are controlling actually the three pieces, if I can put it this way. In terms of market share for PIC, which was your other question, and deniably, we want to become the market leader. So I think market leadership started 30%.

Got it. And in the EICs?

Actually, on the EIC, this mission has been accomplished. We are the market leader today.

And what share do you have, if I may ask?

I still have the same definition, I just gave you.

The next question comes from the line of Gianmarco Bonacina from Banca Akros.

Just a follow-up on the addressable market. I understand you gave some per gigawatt, but what's your expectation on the total addressable market in billions, if you can give a range on this for 40,000 in '27 and also for outer years? And the second question is given that the bulk of the growth would come beyond 2027, can you also share if you expect to grow faster than the addressable market, which I think in the press release this morning, you indicated some mid-teens beyond 2027?

I'm going to need you to reask your first question to make sure I got it, because it's a spin of Sandeep's, and I have failed in the first time, so I don't want to fail the second time. Could you please reask it again?

No, I just wanted to -- yes, a follow-up on the SAM, not per gigawatt, but in total billions. So what's your internal expectation for the SAM in billion dollars in total for ST in 2027 and maybe 2030?

Now it's a great question. Actually, to tell you the truth, it's on purpose we've not done it. And I have to tell you, it's, I'm going to give you some assignment, which is actually to go and modelize by yourself, the amount of gigawatt of AI data centers being deployed because the reason why we did it like this in all transparency with you is that actually, it is changing constantly. And as such, actually, the dollar value also is constantly changing. So we have decided that actually it was better to normalize by gigawatt, and let's you modelize your way based on your own assumption because I have to admit that actually it is even of sale when we look at our forecast right now on an every 3-month basis, they changed so materially that I feel that it's -- we may be underestimating the total amount of gigawatts of data centers being deployed as we speak. So forgive me for not directly replying, but at least, I wanted you to understand my rationale for why we did it that way, okay?

Okay.

And you had a second question...

In terms of the growth beyond 2027, given that it seems that you are still, let's say, scaling up your product line, that is it fair to assume that beyond 2027, you will still grow, let's say, nonlinearly above the expected market growth because you are still say, probably not at your normal market share in 2027 or not, maybe, but, yes.

No, I think it's a fair assumption, especially. It's actually a fair assumption on multiple fonts. In Photonics IC because actually, we are exactly doing exactly what you said in terms of catching up to where we want to be from a market share standpoint, but we have also -- I must admit a lot of near package optics engagements, which are going to be such an accelerant for us beyond '27 that we are counting on. And also, when I look at my colleague, Macro with what he's doing on power and analog, I think actually Marco is spending a lot of time on this new 800-volt architecture. And I expect that 800-volt architecture to start to ramp in '27, and that's such that we should also see the benefits of that beyond '27. So your point is correct for those two reasons, I would say.

The next question comes from the line of Amelia Banks from Bank of America.

I was wondering if you could provide some more granularity around how concentrated the long-term capacity reservations are. Are they with a few hyperscalers? Or is it more diversified than that?

It's actually more diversified thing, Amelia. And I think you were asking this in the context of what we've announced on Silicon Photonics. The value chain is a very interesting value chain because actually, you have chip-level actors, you have module level actors, and you have hyperscalers. And we have actually, with those capacity reservation agreements, we are scanning the entire value chain.

Okay. Great, brilliant. Yes. And then just on a follow-up. Just in terms of the -- again, with the Silicon Photonic announcement, you're stating that the capacity will more than quadruple by 2027. I was just wondering if you could clarify how much of that is relating to sort of front-end versus back-end manufacturing.

Today, these announcement is 100% front-end. I may add one on top of that Amelia to go and help you this because it's something that I did not mention in my presentation, but it's something very important for you to understand. As you know, or may not know, the way we build our Crolles 300 fab is actually by gateways, which means that we can add tranches of capacity as we go. That's a unique advantage. Why? Not only because of the modularity because when we add capacity, our customers do not need to requalify. It's actually copy exact of the previous gateway. So we can add capacity without adding to in -- without adding our customers to requalify. I want to insist that actually this is a value proposition today on photonics. I believe that only ST is able to provide, which is not the case of competitors of ours. And that makes actually the life of our customers way easier. And one of the reason why beyond the 300 millimeter asset, one of the reason also they have a huge interest in what we're doing. I'm closing the parenthesis, Amelia, but I wanted you to have this information as well.

The next question comes from the line of Stephane Houri from ODDO BHF.

Actually, I wanted to have a bit more visibility on the CapEx that has to be involved for this kind of growth. So you've been talking a little bit about Crolles 300, but looking at your CapEx budget, if the growth continues, as you expect, what kind of addition to the CapEx you have to do, and is only Crolles 300 involved in this CapEx expansion?

Good question, Stephane. I would walk backwards. And right now, yes, only Crolles 300 is actually the location where we have actually concentrated our Silicon Photonics activity for one of the reasons that I've described before because of this ability to go and systematically expand without needing our customers to get requalified. Can it be the only answer? Could actually we see eventually Silicon Photonics in Agrate 12 inch. Absolutely, yes. There is nothing preventing us from doing so. In terms of polarizing the CapEx, we will not do it, but what I can tell you, though, to help and go in our direction is that actually to support the growth that we are seeing now. We came in October 2025 with a CapEx plan with, I believe, what is $2 billion to $2.2 billion of CapEx in '26. And so on and so forth for '27 and '28, which we have not shared. What we are obliged to do at this stage is, and we are now in March '26, what we are obliged to do at this stage is to accelerate part of our CapEx sticking toward $2 billion to $2.2 billion envelope, but remixing it because we need to go and accelerate Silicon Photonics. That is something that we are "because it's for a good reason, for us to do." But I have no absolute CapEx number dollar to share with you.

Okay. And if I can have a quick follow-up. Actually, when you speak with people like Infineon, they described for the Power AI business of a market of $10 billion by 2030, and they think they can have a market share of at least 30% to 40%. Your AI opportunity is, let's say, more diversified with Silicon Photonics, Power AI et cetera. Can you maybe give us some visibility on by market? What kind of size do you see, and what kind of market share?

This is what Gianmarco was also asking me earlier. I've been shying away from throwing those numbers because what happened, we share numbers, then actually, there are actually modernization being done, and then actually you go in the market share, the market share can seem really high. I think this is actually what happened to our colleagues in Infineon recently. And actually, you go and question whether or not those numbers are stable. But actually, they may be stable or they may not be stable because this market is evolving at such a pace. So we've shied away from that. We'll let you go and make your own model in terms of overall AI data centers deployment, but we provide you this $230 million, all inclusive of what we do on power and cloud-optical interconnect, which give us a proxy, but right now, that's what we feel the most comfortable to share with together with, obviously, the numbers that we have shared in terms of being nicely about $500 million of revenue in '26, and well above $1 billion in '27, all of that being backed up by the deals that you know or the deal with analysts that you know and many more deals that you don't know yet.

[Operator Instructions] We have a follow-up question from Adithya Metuku from HSBC.

Yes. Just two more questions. Firstly, Remi, I just wondered if you could talk a bit about the scale-up opportunity. Some of your peers in the laser market have talked about that being a much bigger opportunity like by a factor of magnitude. So I just wondered if you could give us some sense of how much your SAM would expand from this $250 million or $230 million you've talked about, if you include the scale-up opportunity and when could this ramp happen? Is it a 2027 story? Is it a 2028 story? You have your peer Broadcom saying one thing, Credo saying one thing, NVIDIA saying another thing. So what is your view here? And I've got a follow-up.

Yes. I -- it did not escape me that there is a lot of spin right now on copper versus non-copper in terms of what is going to be the winning recipe. I will tell you the truth, we are everywhere in some shape or form. Obviously, the dollar content for us when it comes to Silicon Photonics is way higher. But I will try to remain objective. I think that the depth of copper from a scale-up standpoint is only a question of when, not a question of if. It's due to gazillions of parameters, but think of poor consumption in terms of -- poor consumption per bit and do think as well in terms of the ability to go and pack way more compute density in a rack. So I think it's a question of when, not a question of if. And you will see that similarly to EML for connectivity, it will be -- people will try to push and move to 448 gigabit per second service. Actually, some are doing that, but it's only bidirectional. There would be a lot of tricks to try to survive, but it's going to happen. In terms of opportunity size, it's pretty simple. You multiply by 2. That's more or less what's going. You take pluggable, you multiply by 2 that actually give you the near packaged optics and co-packaged optics market size? And that's -- this is as big as it will become. NPO versus CPO, Near Packages Optics versus co-packaged optics. Actually, I'm a believer for the next 5 years that the bulk of the business will be on near packaged optics just because of RAS; reliability, accessibility, serviceability, in the data center. And the fact that actually -- it gives hyperscalers way more flexibility on RAS than actually what they can do with CPO. So NPO will be the winner for the 5 years to come. When will you see NPO was the second question. This, I will tell you very firmly that you will start to see NPO from second half '27 for AI clusters. That is going to happen. Is it going to be a hard switch 0 to 100? The answer is no, because you will see actually new architecture being introduced, both with copper technology and also with optical technology before actually they move fully to optical technology. When could you think that a rack for scale-up will be 100% optical base? And at what point there would be no more copper. Okay, pick your points between 2029 and 2030. Let's take 2030 to be on the safe side. So starting to run similar '27, 100% coverage in 2030 is my opinion.

Got it. That's very clear. Maybe just to clarify, you said the opportunity would be 2x from -- is that twice the $230 million you gave? So if I include scale-up then basically, it should be $460 million. Is that the -- have I understood correctly?

That's a good question, but it's actually a very clever one, which I cannot answer because I didn't give you the breakdown of $230 million. But when this happened, I think the $230 million will grow, for sure, because if we look at the $230 million we gave you, it's only based on pluggable optics. So that's a good clarification question you just asked, I think. We have not included the growth of NPO. So this will come on top of the $230 million, but now I'm stuck. I cannot give you any numbers because then you can -- so I will have to find a way next time to answer this question more elegantly.

Okay. Got it. And then just secondly, on the bottlenecks and networking today or optical networking today, where are they from what you see today, where are the bottlenecks?

I think, there is a bottleneck of today, bottleneck of tomorrow. I think if you ask anybody today where are at the bottlenecks, they may tell you laser. I think that if you ask people what could be bottlenecks tomorrow, they will tell you photonics. Why, because lasers are lasers, are lasers, are lasers, they are used anywhere. So you may need more of them because it's EML, and it's one laser per lane. You may be less of them because it's Silicon Photonics and it's 1 laser for 2 or 4 or 8 lanes, the lasers you need. But what's happening is that the transition to 1.6T is completely accelerating and 1.6T at 80% will be photonics. So now if there is an explosion in terms of gigawatt deployment at 1.6T, the pressure on photonics will be very high, which kind of explained why we're doing what we're doing and why we are thinking of doing even more, because of that very context.

Got it. Very clear. And when you say tomorrow, is that 2027 or 2028?

Yes. That ZIP code. I will not be able to give you something more accurate than what you just said.

There are no more questions at this time. I would now like to turn the conference back over to Jerome Ramel for any closing remarks.

Yes. Thank you, Maura. So I think this is ending our call. So thank you all very much for being with us. We remain at your disposal for any follow-up questions. So we look forward to asking you on March 16 for our conference call, ST Intelligent Sensing Enabling Critical AI with Marco Cassis. Have a nice day. Thanks.

Ladies and gentlemen, the conference is now over. Thank you for choosing chorus call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.