IP&E Outlook: Momentum Is Building

Recovery Momentum Continues to Build Late into 1Q, B2B Ratios Increasing; Optical/Cooper Debate Continues in AI

What’s Changed/What’s New?

• Broader demand continues to strengthen, with recovery momentum broadening, supporting IP&E fundamentals and pricing efforts amidst raising materials and logistics input costs.
• Bookings still accelerating M/M. B2B now seen 1.25–35x vs 1.15–1.2x last month, supply chain fully convinced industry is in early innings of broad based recovery.
• Kyber design noted still fluid, likely to evolve from GTC, with potential CPC and other copper/connector connectivity content added.
• Kyber midplane connector likely shifting to NVDA design, enabling multi-sourcing with 3–4 suppliers likely splitting allocation.
• Nvidia’s new platforms (Groq LPX, Vera 256, storage) noted leveraging Amphenol’s HD Paladin backplane, creating incremental copper TAM – estimated at ~$650M in CY27, assuming 25% attach rate to compute racks and $10-$20K in backplane content.

Top 4 Channel Comments:

• Hyperscalers are likely to deploy optical backplanes over the next 1-2 years to build reliability data, but we don’t see large-scale deployment of optics inside the rack until the technology is proven. Copper is still sufficient for many AI scale-up applications.
• Currently, XPO implementations are combined with flyover/CPC from the switch ASIC to the front panel because this is a new standard and PCB traces don’t work. We need to support 224G and for the next generation 448G, PCB is not even in the roadmap.
• Early into 2026, demand and bookings are better, pricing is firmer, and supply is tighter. Our B2B in Jan was 1.3x vs. 1.1x in Dec and Feb was at 1.35x. Monthly shipments were the strongest in 3 years in Feb, which is atypical given the fewer shipping days
• So far, we have seen two direct effects from the war in the Middle East. First, some lead times are up because certain shippers are now avoiding the Suez Canal out of abundance of caution which adds 4 weeks to transportation. Secondly, insurance costs and freight rates have shot up. We haven’t seen an impact from this yet, but we are watching the impact of higher oil prices on resin prices and the supply of certain chemicals that go into resin production.

Other Key Takeaways:

• FIT seen securing license to mfg. Amphenol connectors for Nvidia’s backplane/VR72 midplane; FIT ramp timing/use case unclear.
• Amazon also seen leaning towards similar hybrid (copper/optics) scale up approach for Trn4, potentially in a multi-SKU approach.
• Industry transition to optics intra-rack still likely phased overall; copper in AI likely shifting from content to a unit growth story.
• NVidia scale up CPO adoption as likely limited until 2028; Kyber 1152 design TBD, potentially copper plus optics intra-rack.
• CCS DC revenue near term viewed driven by scale-out, cluster size and topology. Estimating several hundred dollars of passive fiber content per GPU, with CPO, multi-plane architectures and larger clusters driving potential uplift to >$1,000 per GPU in the future.
• Trn 3 demand still 2.3-2.4M or 60K racks in CY26. Connector TAM little changed M/M projected up 100-120% Y/Y in CY26.
• TPU CY26 forecast unchanged at 68-69K racks. CY27 projected at 100K racks or 6-7M TPU.
• META and xAI lead scale-out Ethernet AEC usage in Nvidia deployments, with xAI attach rates estimate >3:1 per GPU.
• Industrial inflecting positively, with broad-based strength and rising bookings supporting upside to CY26 growth expectations.
• Auto CY26 still stable, not improving; CY26 outlook unchanged at mid-single digit growth, but with ongoing downside concerns.
• NT impact from Middle East disruption minor, MT/LT longer-tail shipping routes/increased raw materials costs could further pressure lead times and lead to additional price increase in 2026.

IP&E fundamentals continue to improve M/M, with bookings momentum driving higher B2B ratios and recovery broadening across multiple Industrial subsegments. Strength in Datacenter/AI remains robust, while Automotive continues to lag. The sustained improvement in fundamentals is supporting pricing across suppliers and products, further bolstering the outlook for 2026. As conditions continue to strengthen, we remain confident the industry is positioned for double-digit growth, barring any macro/geopolitical shocks or demand disruptions (e.g., memory shortages).

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