PCB, CCL, and substrate materials in AI data-center interconnects Report Interpretation

Overview

J.P. Morgan examines whether co-packaged optics could reduce demand for high-spec CCL and PCB materials in AI data centers. Its conclusion is that the concern is premature: near-term CPO deployment should have limited impact, while NPO and future high-connectivity architectures may increase material-performance requirements. The report reiterates a constructive view on Elite Material Co.

Core views

The report argues that concerns over CPO reducing CCL and PCB consumption are likely overdone in the coming year. CPO could theoretically lower high-spec CCL use because more data would travel through optical cables rather than PCBs. However, J.P. Morgan expects the most likely near-term deployment to be at spine switches in scale-out data-center networks. Under that scenario, only a limited number of PCBs would face potential specification de-rating relative to total PCB content across an entire data center, where specification migration should continue. It also expects CPO-enabled switches to retain high-end CCL of at least M7 because their motherboards still host numerous other components. The report sees NPO as a potentially more immediate and positive driver for materials specifications. Multi-rack clusters such as Nvidia's NVL576 could eventually require optical interconnects for inter-rack links, including in a possible Rubin Ultra configuration. J.P. Morgan believes NPO may be adopted ahead of CPO and could accelerate CCL and PCB upgrades because large volumes of data travel across NVLink switch boards. The electrical-performance requirements are described as extremely demanding, with even M10-grade CCL having been challenging to qualify. Since NPO could be adopted by many customers, the report sees it as a potential source of higher specifications for CCL and PCB products. Even if CPO is eventually adopted for NVLink scale-up connectivity, J.P. Morgan expects a backplane to emerge as a sizable opportunity. Such boards would carry very high connectivity and therefore substantial PCB and CCL content, which the report believes could more than offset any reduction in CCL specification for NVLink switch boards. For Elite Material Co, the report says the market has likely priced in much of the PTFE technology concern. The shares had declined 22% over the prior month while the TAIEX rose 3%, and Elite Material was trading at approximately 20x 2027E. J.P. Morgan notes that PTFE would be used only in selected areas if adopted, leaving continued growth opportunities for high-speed materials. It also sees potential for electrical performance beyond M10 and does not rule out high-speed materials eventually matching or exceeding PTFE performance. On this reasoning, it considers the CPO concern excessive and sees the latest pullback as a decent entry point, with potential for upward earnings revisions.

Analysis framework

The report traces how optical-interconnect choices affect PCB and CCL material demand across data-center architectures. It contrasts near-term scale-out CPO deployment with NPO and potential future CPO deployment in scale-up NVLink systems, then applies the resulting specification and content implications to Elite Material's valuation and recent share-price decline.

Methodology notes

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Data-center interconnect architecture to PCB and CCL material-demand transmission

  The report assesses how CPO, NPO, switch-board and backplane designs would alter optical versus electrical connections, then translates those changes into expected CCL grades, PCB content and material demand.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Elite Material Co (2383.TW)

  Primary covered company and potential beneficiary of continued high-speed CCL and PCB specification upgrades.

  Strengths

  Exposure to high-speed materials, with scope for electrical-performance improvement beyond M10.

  Weaknesses

  Shares have been pressured by concerns about PTFE adoption and CPO-related material displacement.

  Comparison

  The shares declined 22% in the past month versus a 3% gain for the TAIEX.

  Risks

  Greater-than-expected PTFE adoption or a material CPO-driven reduction in high-spec CCL use could challenge the thesis.

Key data

• Elite Material share performance-22% in the past monthVersus a +3% change in the TAIEX; the report attributes the weakness largely to PTFE-adoption concerns.
• Elite Material valuation~20x 2027EThe report says PTFE technology risk is largely reflected in the share price.
• High-end CCL requirementNo less than M7Expected for CPO-enabled data-center switches because the motherboard contains many other components.
• Advanced CCL performance hurdleM10The report says even M10-grade CCL has so far been challenging to meet the electrical-performance requirements of the relevant NVLink switch-board design.

Impact & implications

J.P. Morgan's central implication is that a shift toward optical interconnects need not translate into a broad near-term downgrade in PCB or CCL demand. It expects continuing data-center specification migration, possible NPO-led upgrades, and future backplane content to support high-speed-material opportunities. For Elite Material, it sees the pullback as excessive relative to these opportunities.