Run 4 · Power, Cooling, Optics & Physical Infrastructure/
Scarcity rents are moving upstream into physical AI bottlenecks
The AI optics bottleneck shifts upstream to indium phosphide
mixed·Impact 4/5 · high confidence
Analysis by Frank Locascio and TheBRRR Research
What happened
Export controls, substrate availability and long-term supply agreements focused attention on the InP materials behind advanced optical lasers.
Why it earned coverage
The potential scarcity rent is migrating from transceiver assembly toward wafer, substrate and laser control points.
Investment transmission
Advanced AI optics require InP-based laser devices, so substrate geography and capacity can determine shipment growth and pricing power.
Affected exposures
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Next observable receipt
China permit normalization and disclosed non-China InP capacity ramps clarify who controls incremental supply.
What would invalidate it
Permits normalize rapidly, competing capacity scales or optical orders prove double-counted.