China now holds more than 30% of the global photonics market. Two decades ago its share was roughly a third of that. Europe, which held a comparable position at its peak, is now at 15% — a contraction that sits behind a wave of investor attention photonics has attracted in 2026.
The AI boom has a direct reason to care about light. Optical connections transmit data faster and generate less heat than copper, and the data-centre buildout required for large-scale AI workloads is pushing the industry toward silicon photonics and integrated optical components. Since March, Nvidia has put more than $6 billion into two photonics companies, Coherent and Lumentum, as it works to replace electrical interconnects inside hyperscale facilities.
That investment has made the wider sector more visible to fund managers. The latest signal: Defiance launched Europe's first dedicated photonics exchange-traded fund, listed on the London Stock Exchange and Borsa Italiana since 9 July. A dedicated ETF creates a pricing signal and liquidity anchor for companies that have previously sat in dispersed industrial or semiconductor buckets.
Daiva Rakauskaitė, managing partner of Aneli Capital, a Vilnius-based €35 million early-stage fund with photonics in its mandate, reads the moment as a structural inflection. Her concern is the gap between invention and production: European companies build technically excellent photonic devices but continue to lose manufacturing volume to Chinese competitors operating at lower cost. "Europe still produces world-class laser science; now it needs to make a decisive strategic move by investing to close the scale-up gap," she says.
Mercedes, Bosch, and Volkswagen have issued a joint call for resilient photonic supply chains, and the Chips Act lists integrated photonics as a key enabling technology alongside conventional electronics. Rakauskaitė argues that the policy label means little without patient capital reaching companies at the scale-up stage, after first prototype and before competitive-volume manufacturing. "Governments need to recognise that a photonics startup succeeding at scale is a matter of economic security," she says.
Lithuania offers a narrow proof of concept. Its laser industry, which marks its 60th anniversary this year, exports 90 to 95% of output to more than 80 countries, growing at more than 16% annually. The question for the rest of Europe is whether that can be replicated at the scale needed to close the gap with China.
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