Shares of optical equipment maker Corning are plummeting on Thursday, likely in response to comments from popular Broadcom CEO Hock Tan on the company’s earnings call the night before. However, the market reaction appears to be a clear overreaction based on Corning’s own guidance and industry outlook. A key pillar of Corning’s investment thesis is the expanded use of fiber optic technology in data centers, which will eventually replace copper as the means of data transmission. On Wednesday night, Tan offered his opinion on the move, and his commitment to copper in certain use cases appears to be what is causing the decline of fellow club name Corning. Before we dig into Tan’s comments, let’s first define some key terms used when discussing building a data center, specifically networking all the different parts together to enable fast and reliable AI computing. These terms are “scale up” and “scale out.” Scale-up refers to connectivity within a single server rack. It is essentially a filing cabinet-like structure that contains a number of computing components. Scaling up means connecting different chips together to work as one giant chip. This is about connections within one rack, so the distance between connections is very short. Scale-out, on the other hand, refers to connections made between racks across a data center. AI data centers have rows and rows of server racks. With scale-out, the distance between endpoints is much greater. This means that the data can cover more territory. Now back to the Broadcom call. Tan discussed Broadcom’s networking roadmap in prepared remarks, saying Broadcom customers will likely “continue to use direct-attached copper” until at least 2028. Later, during a question-and-answer session on the conference call, Mr Tan was asked to elaborate on his comments on the copper line. In response, Mr Tan said he was only referring to scale-up solutions with a 2028 timeline. He said that when it comes to scale-out technology, Broadcom is already working on optics because it is already past the point where it makes sense to use copper wire. Optical technology is generally considered superior to copper wire for transmitting data over long distances. This is mainly because the signal does not degrade even at high speeds. But when it comes to connecting chips to each other at scale-up, Tan argued, “The best way to do that is to use directly connected copper wires, which minimizes latency, power consumption and cost. So we want to keep doing that as long as possible, especially at scale-up. At scale-out, we’re beyond that. We’re using light.” To be clear, Tan said scale-up will eventually need to move to optical-based solutions. His argument is that we just aren’t there yet and probably won’t be there for several years. The argument is that it’s best to push copper to its limits before tackling the added complexity of moving into optics. Now, this may appear to be a negative development and undermine optimism about Corning’s transformation into a key cog in building AI at scale. But when you dig deeper, Tan’s outlook is not at all contrary to what Corning executives have said. GLW .SPX YTD Mountain Corning’s year-to-date stock performance compared to the S&P 500. Let’s take a look at what Corning CEO Wendell Weeks said during the company’s 2025 Q4 earnings call in late January. In addition to its quarterly numbers, Corning also raised its growth targets related to its Springboard initiative, a multi-year plan to drive sales growth. This comes just one day after Corning announced a blockbuster $6 billion deal to supply MetaPlatform with fiber optic cables for scale-out applications in the Instagram parent company’s data centers. In discussing the Springboard plan, Weeks said he does not anticipate a significant revenue contribution from expanded use of optics. If that happens, it would be a pure positive over what Corning already projects. Notably, the Springboard plan currently covers until 2028, the same timeline as Mr Tan’s copper comments. Nevertheless, Weeks added: “We believe it is inevitable. The timing is more difficult to determine. There are scenarios where that timing is within the time frame between now and 2028. There are also scenarios where it starts primarily in the second half of 2028 or beyond. What we’re trying to do is not to speculate too much. And unless there’s really compelling evidence about the timing of something as important and big as the opportunity to scale up, we tend to take that view from a conservative perspective. ” More recently, Corning Chief Financial Officer Edward Schlesinger, who spoke at Morgan Stanley’s influential technology and media conference this week, reaffirmed Weeks’ statement, “I don’t think we’ll see scale for probably two to three years. ‘s view is that there will probably be some pullback in 2028, and then it will continue to grow until the end of the decade, but you mentioned CPO, and I think CPO will actually scale up, with scaling out and scaling up, probably next year or 2028. I think there’s a chance that scale-out CPO connectivity will start to materialize a little earlier than 2020. Our main contracts are for the scale-out part of the network. ” Conclusion We understand that some investors and traders view Tan’s comments on copper as bearish on the Corning story and the growing adoption of optical technology in data centers. But that seems like a wrong interpretation. Both companies appear to be in complete agreement on the use of optics for scale-out and when optics may play a larger role in scale-up connectivity. By the way, fellow club name Nvidia announced several strategic partnerships in data center optics this week with Lumentum and Coherent. This is another proof in our minds that optics will play a bigger role in the future. Nevertheless, shares of both Lumentum and Coherent will also be penalized in Thursday’s trading. If anything, Thursday’s decline in Corning’s stock shows the importance of taking profits in stocks that have moved parabolically — just as we’ve seen with Corning this year, which entered Thursday’s trading up about 65% since the beginning of the year. When a stock catches fire, some fellow shareholders will latch on to something that’s likely to go negative, even if it’s not big news, and use that as a reason to sell. (Jim Cramer’s charitable trusts are long AVGO, GLW, and NVDA. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. 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