💰 First The Brains, Now The Nervous System

OUR PARTNER: CYTONICS

The Key to This $240B Market Is in Your Bloodstream

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Their first-generation therapy has already treated 10,000+ patients. Now they've engineered a 200% more potent, mass-producible version pushing toward FDA approval.

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THE MAIN EVENT
First The Brains, Now The Nervous System ⚡

The AI trade has moved in waves. Each wave has been driven by one physical constraint, and each time, the market has rewarded whoever controlled the choke point.

• 2023-2024: GPUs were the bottleneck. Logic was scarce. Nvidia became the top-performing stock in the S&P 500 for back-to-back years.

• 2025: Memory took over. As models got "smarter," they needed massive pools of data to store their thoughts. SanDisk led the index.

• 2026: The constraint is shifting again. We have the "brains" and the "memory," but we can’t move the data fast enough.

This time, the bottleneck is the “nervous system.” Specifically, photonics.

Photonics 101: Electricity vs. Light

If you’re trying to understand the difference between the old way (copper) and the new way (photonics), imagine two kids talking through tin cans and a string.

1. Copper is the string. If the string is too long, the sound gets fuzzy. If you try to whisper 1,000 words a second, the string vibrates so hard it just turns into a "buzz." That’s why copper fails past a certain point.

2. Photonics is a laser pointer. You can flicker that light as fast as you want, and as long as your friend can see the light, the message is clear.

At a high level, photonics is the use of light to move data. That sounds technical, but the building blocks are straightforward:

• Transceivers (The Parts): The "laser interpreters" from Lumentum or Coherent. These devices contain both the lasers that "speak" in light and the sensors that "translate" it.

• Fiber Optics (The Road): The ultra-pure glass cables (from Corning) that carry that light.

• Optical Networks (The System): The full traffic grid that connects 100,000 GPUs into one giant supercomputer.

The "Data Wall" Is Real

AI chips are now so fast that they spend up to 60% of their time idle, literally waiting for data to arrive. If you buy a $40,000 Blackwell GPU but use old copper cables, it performs like a $4,000 chip.

This is what engineers call the "Data Wall."

Nvidia solved the internal speed problem, pumping out data faster than ever. But that created a massive traffic jam outside the chip.

The only way to clear it? Light.

Why Share of Wallet is Exploding

Networking used to be a small piece of the total cost. That is no longer true.

• The Rack Tax: In a $3M to $8M AI rack, networking and optics now represent up to 15% of the total cost. Just three years ago, that was less than 5%.

• The Multiplier: In 2023, a standard cluster needed dozens of optical transceivers. In 2026, the new "reasoning" models require hundreds per rack.

• The Market: Bank of America just hiked its estimate for the AI optical market from $14B in 2025 to $73B by 2030.

This isn't just a budget shift. It’s a repeat of the same supply-side panic we saw with GPUs and memory. Now we’re seeing it with lasers.

• Sold Out: Lead times for 1.6T transceivers, the new gold standard, have stretched over 12 months.

• The Moat: You can’t easily build a photonics factory. It’s a physics problem, not a software problem. Companies like Fabrinet are seeing margins surge from 20% to over 40% because they are the only ones who know how to package these lasers without them melting.

Early Signals

The market isn't waiting for the earnings reports. It is moving now.

• Lumentum (LITE): Up 87% YTD. It just hit another all-time high this week after being added to the S&P 500 on March 23rd.

• Coherent (COHR): Up 32% YTD. Like Lumentum, they are the light engines of the industry.

• Corning (GLW): Up 55% YTD. They are the "King of Glass." Their multi-billion-dollar deal with Meta to provide fiber backplanes has turned them into a high-growth AI darling.

• Fabrinet (FN): Up 21% YTD. They specialize in "precision assembly," the process of mounting tiny lasers into the modules that power AI racks.

• The Nvidia Stamp of Approval: Nvidia isn't taking chances. They just locked in $4 billion in prepayments to Lumentum and Coherent to secure their laser supply through 2030.

The Connectivity Supercycle

The setup is familiar. A bottleneck has formed, supply is tight, and demand is rising. That is exactly what defined the GPU phase and then the memory phase.

For photonics to follow the same path:

1. Data center spending needs to continue increasing.

2. AI clusters need to keep scaling, which drives more connectivity demand.

3. Supply constraints need to persist.

If those conditions hold, the narrative is clear.

But the market is already moving ahead of today’s numbers. Valuations across the group have ballooned, with most of these names trading at 40x to 60x forward earnings.

As Morgan Stanley put it:

“We would fully expect these names to work as long as capex data points are revised higher.” However, they wrote, “having added ~$180 billion of market capitalization over the last year, we have begun to price-in perfection.”

MARKET MOOD
Chips Up, Crypto Down, Chaos In Between 🤖

Winners

Arm Holdings ($ARM) - Market Cap: $164.4B (Week-to-Date: +17.0%)

Arm ripped higher after unveiling its first in-house AI data center CPU, marking a big shift from licensing designs to building its own chips. Meta is already on board, and others like OpenAI are lining up. As AI moves toward always-on agents, CPUs are back in focus — and Arm wants a slice. Executives think the chip line could drive $15B in annual revenue by 2031.

Chewy ($CHWY) - Market Cap: $11.2B (Week-to-Date: +15.6%)

Chewy missed on sales and earnings, yet the stock still rallied. Why? Margins. The company showed it can squeeze more profit out of each customer through Autoship orders and pet health insurance. Add better cost control and strong guidance, and investors looked past the weak top line.

JetBlue Airways ($JBLU) - Market Cap: $1.7B (Week-to-Date: +11.9%)

JetBlue popped after reports it may explore a sale, potentially to a larger airline. The company has reportedly mapped out how combinations with United, Alaska, or Southwest would be viewed by regulators. After its Spirit merger got blocked in 2024, JetBlue could now flip the script and become the target.

Losers

Circle Internet Group ($CRCL) – Market Cap: $26.1B (Week-to-Date: -22.0%)

Circle got hit as lawmakers debate new stablecoin rules under the pending Clarity Act. One key issue is whether stablecoins like USDC can offer interest. Banks are lobbying against it, since yield-bearing stablecoins compete with deposits. At the same time, rival Tether is taking steps toward getting its first complete audit, chipping away at Circle’s edge as the “safer option.”

DraftKings ($DKNG) – Market Cap: $10.6B (Week-to-Date: -10.1%)

DraftKings dropped as regulatory pressure started stacking up. A proposed Senate bill could limit its push into prediction markets, a key growth area, while an NCAA lawsuit aims to block its use of March Madness-related branding. Add in rising competition from prediction platforms, and the former duopoly with FanDuel is starting to look less secure.

OUR PARTNER: TABS

AI Alone Can’t Run Revenue

Finance doesn’t run on “mostly right.” It runs on math.

In The Architecture Behind AI-Native Revenue Automation, Tabs’s CTO breaks down why LLMs alone aren’t enough—and what it actually takes to build audit-ready, AI-driven contract-to-cash systems for modern B2B teams.

Get the whitepaper

CHART OF THE WEEK
Was “Sell America” Just A Headline? 🇺🇸

“Sell America” made for great market drama, but this chart by Apollo suggests the narrative was mostly a ghost story. Days when U.S. stocks, the dollar, and Treasuries all fell together didn’t actually spike in 2025 or 2026.

Despite the “Liberation Day” panic, we never saw the massive exit everyone feared.

Stocks recovered quickly, the dollar and rates held their ground, and foreign investors actually doubled down—pushing their ownership of U.S. stocks to its highest level in nearly 60 years.

This month’s hot-war reaction also looks nothing like a “Sell America” trade:

• U.S. Dollar: +2%

• 10-year Yields: +10% (Bonds being sold off)

• S&P 500: -6%

• Magnificent 7: -10%

• Gold: -16%

What’s happening instead is a frantic scramble for cash.

Fund managers’ average cash pile jumped from 3.4% to 4.3%, the biggest one-month leap since the 2020 COVID crash. In other words, the "pros" swung from being light on cash to hoarding it.

When things got real, they didn’t flee America. They sold everything from stocks to gold, and they hid in literal dollars.

FAST FACTS
Rulebooks, Recession Risks, And Rosie 🐶

🏛️ Trump wants one AI rulebook: The White House rolled out a national AI framework designed to preempt state-by-state rules, arguing that 50 different laws would slow innovation. [Read]

😰 Recession odds are climbing: Moody’s now puts the chance of a U.S. recession in the next year at 49%, as war-driven oil spikes and labor market cracks raise the pressure. [Read]

🐶 AI helped build a dog cancer vaccine: After surgery and chemo failed, an Australian entrepreneur used ChatGPT and DeepMind tools to help create a custom mRNA cancer vaccine that shrank most of his dog Rosie’s tumors. [Read]

📉 This hot AI fund crashed back to earth: Fundrise’s VCX exploded on private-tech hype, then dropped hard as the market remembered one small detail: the underlying assets were worth far less. [Read]

⚖️ Social media’s legal trouble deepens: Meta and YouTube were hit with a new $6M verdict in LA over addictive platform design, just days after Meta alone got tagged for $375M in New Mexico. [Read]

💵 Cash is still king-ish: Even as mobile wallets take over, 84% of Americans oppose going fully cashless. Can you guess which bill is now the most common in circulation? [Read]

👶 Trump Accounts aren’t just for newborns: Think your kid missed out because they were born before 2025? Not so fast. The $1,000 seed is just one piece of the story parents need to know. [Read]

WORDS TO REMEMBER
Price And Value Are Not The Same 🧠

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