According to reports, the annual Open Compute Project (OCP) Global Summit will kick off next Monday. As the most influential "bellwether" event in the data center and AI networking space, this year's OCP carries exceptionally high expectations — whether hyperscale cloud providers can deliver clear answers on next-generation AI network architecture, and whether the commercialization timeline for NPO/CPO (Near-Package Optics/Co-Packaged Optics) can be established, will directly determine the future direction of the entire optical communications and networking equipment supply chain.

Morgan Stanley, in its latest OCP preview report, offers its assessment: the conference is expected to "clear the fog" on AI network design direction, but the short-term stock price impact on individual names may be limited.

Morgan Stanley analyst Meta Marshall pointed out the unique value of this year's OCP. Unlike other trade shows throughout the year that predominantly showcase products from a supplier's perspective, OCP's distinctiveness lies in hyperscale cloud providers "taking the stage themselves" to articulate their architecture evolution direction from a customer's viewpoint. Marshall expects keynote speeches from giants including Microsoft (MSFT.US), Meta (META.US), Google (GOOGL.US), and Oracle (ORCL.US) to be the biggest highlights, focusing on two major themes: first, how each company can find a "common solution" to shared challenges including power, thermal management, cost, cabling, and ecosystem issues as they migrate to higher-speed data center networks; second, the closely watched scale-up network architecture, which is precisely the segment undergoing the most dramatic evolution.

Morgan Stanley specifically notes that debates around interconnect fabrics, the trade-off between copper and optical cables, and the commercialization timeline and architecture roadmap for CPO/NPO are expected to spark intense discussion at the conference. These three topics represent the most critical and most contentious focal points in the current AI networking supply chain.

NPO/CPO: Core Debate Continues After ECOC

The report explicitly states that NPO/CPO remains the core debate point following the European Conference on Optical Communication (ECOC), with commercialization timelines and deployment pathways as the focus. Despite intensifying discussion, Morgan Stanley remains cautious: it expects ongoing network innovation and product launches at the conference, but without clearer customer commitments materializing, short-term stock price catalysts will be limited. Morgan Stanley believes that supply chain expansion, increased customer adoption rates, and gross margin improvement are the key variables driving individual stocks.

On positioning, the firm continues to prefer Keysight Technologies (KEYS.US), while Lumentum (LITE.US) and Coherent Corp (COHR.US) are seen as more sensitive to the NPO/CPO roadmap. The divergence logic: as a test and measurement leader, Keysight benefits from testing demand regardless of which technology route prevails, possessing a "route-neutral" attribute; while Lumentum and Coherent are directly exposed to the dynamics of NPO/CPO deployment timing, with both upside potential and uncertainty coexisting.

Short-Term Catalysts Already "Priced In"

Worth noting is that Morgan Stanley flagged OCP's inherent "headline risk" — particularly for companies like Arista Networks (ANET.US) that are deeply tied to cloud providers. However, the report also notes that the sector has recorded positive performance over the past few weeks, and stock price gains may have already reflected potential conference positives in advance, meaning the room for "expectation realization" may be partially exhausted. Its overall industry rating is "In-Line."

Keysight Technologies (KEYS.US) is Morgan Stanley's top sector pick, maintaining an "Overweight" rating with a price target of $13.30. As a test and measurement leader, its "route-neutral" attribute means it benefits regardless of which technology path — NPO or CPO — prevails, making it a safe haven amid AI networking uncertainty.

Morgan Stanley maintains an "Overweight" rating on Arista Networks (ANET.US) with a price target of $220, based on 47x 2027 estimated P/E (or approximately 40x 2028 estimated P/E). This valuation carries a premium relative to networking peers, reflecting its high growth, hyperscale data center cycle, and AI opportunity, though it is closer to optical module/AI peers. However, its highly concentrated customer base in Microsoft and Meta constitutes a core downside risk.

Morgan Stanley maintains "Neutral" ratings on Coherent Corp (COHR.US) and Lumentum (LITE.US), viewing them as more sensitive to the NPO/CPO roadmap. Coherent's price target is based on approximately 28x FY28 baseline EPS (about $13.3), while Lumentum's is based on 25x 2028 P/E (about $40). Both valuations carry premiums relative to historical ranges due to AI growth prospects.