Prices for specialized optical fiber used inside AI data centers are forecast to average more than five times their 2025 levels this year. Higher prices could benefit Corning Incorporated, a major manufacturer of fiber-optic cables and connectivity equipment. Corning has a supply agreement worth up to $6 billion with Meta Platforms.
Corning's Optical Communications business increased second-quarter sales 32% to $2.07 billion. The business increased segment net income 77% to $438 million. However, CEO Wendell Weeks said higher fiber prices are not the main reason for the profitability improvement.
TrendForce released research Monday forecasting a global optical fiber shortage of 180 million fiber-kilometers this year, with shortages potentially lasting until 2028. TrendForce puts industry capacity utilization at 92%. Optical fiber inventories have fallen to just one month's supply. Production expansion typically takes 18 to 24 months. Major customers are signing long-term agreements to secure future deliveries as fiber supplies tighten.
Corning's agreement with Meta runs through 2030 and covers fiber, cables and connectivity products. Meta will also serve as the main customer for an expansion of Corning's North Carolina cable factory. The commitment gives Corning committed demand as Corning increases production.
Wolfe Research analyst George Notter questioned Weeks during July's earnings call about rising prices and Corning's growing reliance on long-term agreements. Weeks said prices are higher but are not the main driver of improved profitability. Weeks credited higher-value connectivity products that help customers build networks faster and more cheaply. Weeks said Corning could sell more of Corning's newest products if Corning had the capacity to manufacture those products.
Corning shares have lost roughly half their value since reaching a record high in June, despite booming demand for Corning's optical products. UBS raised its Corning price target to $201 earlier this month and maintained a Buy rating. Citi has a $220 price target for Corning. Bernstein has a more cautious $140 price target.
Polymarket traders assign roughly 28% odds to Corning's third-quarter optical revenue exceeding $2.3 billion, although trading volume is just $3,500. A separate Polymarket market assigns roughly 9% odds to an AI industry downturn meeting the contract's specific conditions by year-end. That market has attracted more than $3 million in trading volume.
Meta reports earnings Wednesday, Oct. 21. Corning reports earnings Oct. 27.
Meta's Fiber Partner Corning Faces Rising AI Fiber Prices and Supply Shortages
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Summary
Corning, Meta’s fiber partner, is set to benefit as AI-driven fiber prices are projected to surge over fivefold this year compared to 2025 levels. Corning’s Optical Communications segment posted a 32% revenue jump to $2.07 billion in Q2, with net income soaring 77%. A global fiber shortage of 180 million fiber-kilometers is expected by 2026, with tight supplies through 2028. Corning and Meta have a $6 billion, long-term deal through 2030 for fiber and connectivity products. Despite this, Corning’s shares have fallen nearly 50% from their June high. UBS and Citi raised price targets, while Bernstein warned investors to monitor the fear and greed index closely. Analysts suggest altcoins to watch may outperform as market sentiment shifts.
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