A New AI Shortage Is Coming. One CEO Just Predicted it Will Be “Bigger Than Memory.”

With AI capex dominating marketplace sentiment, tech leaders are tempting the bulls. Speaking astatine the RAISE Summit, Lumentum CEO Michael Hurlston warned that the adjacent AI infrastructure bottleneck is indium phosphide (InP), a niche semiconductor material. The shortage, helium said, volition beryllium worse than what the representation manufacture faces.

"Between the 2 of us, I don't deliberation we tin work the request that NVIDIA and others are present putting connected america to lick this absorption occupation successful the information center. And so, the shortage of indium phosphide, I think, volition go adjacent much acute than what we spot from the representation guys," Hurlston said.

Why InP, and Why Now

While spot stocks predominate the headlines, the lesser-known communicative is what keeps information moving betwixt them. InP is simply a compound semiconductor that emits light. "it's fundamentally thing that tin emit light. It's a property, a worldly that tin emit light, and we person 5 indium phosphide fabs that we're trying to ramp to scale," the Lumentum main further explained. Just astir each laser wrong an AI datacenter transceiver, each pump laser feeding an optical amplifier, and each co-packaged optics (CPO) motor adjacent to a GPU relies connected it.

To support traders guessing, standard alteration differs from anterior optical cycles. "The numbers of lasers that those benignant of customers (telecom) would deploy are successful the hundreds, right? Now we're talking astir hundreds of millions," Hurlston said. Ramping from thousands of wafers to millions of wafers successful a non-silicon worldly is, successful his words, "no tiny feat."

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The Numbers Back Him Up

Lumentum (NASDAQ:LITE) posted Q3 FY2026 gross of $808.4 million, up 90.1% twelvemonth implicit year, with non-GAAP operating borderline expanding 700 ground points sequentially to 32.2%. On the net call, Hurlston quantified the gap: "The supply-demand imbalance is astir apt adjacent higher than we reported successful our past call, determination greater than 30%." Pump laser constraints are present "probably the biggest contented and were somewhat unanticipated" and cardinal components are "effectively sold retired for the foreseeable future."