REDMOND, Washington, March 23, 2026, 08:46 PDT
Microsoft last week detailed a new MicroLED cable concept it claims could slash power consumption for short-haul connections in AI data centers by roughly half, targeting commercial rollout with partners toward the end of 2027. Shares of Microsoft gained around 1.2% to $386.60 in early Monday trading.
Timing’s critical here: power isn’t just an expense for AI anymore—it’s becoming a ceiling. Alphabet President Ruth Porat, speaking Monday, noted the U.S. isn’t going “full throttle on energy.” Last month, Reuters reported that the largest U.S. AI operations are now pulling more than 1 gigawatt of nonstop load, which could supply power to as many as 850,000 homes. Reuters
Google pushed forward last week, widening deals that allow utilities to dial back power consumption at certain data centers during high-demand periods—freeing up to 1 GW for curtailment. On a different front, Amazon has flagged grid bottlenecks as a drag on its European data-center growth.
Microsoft and MediaTek announced on March 17 they’ve built a new kind of active optical cable—AOC for short—using MicroLEDs in place of traditional lasers. The design swaps in imaging fiber first made for medical endoscopy and transmits data via hundreds of slower channels, not just a handful of high-speed ones.
The companies claim their design could cut power usage by as much as 50% compared to usual laser-based optical cables, while still matching the reliability of copper over longer stretches inside data centers. Microsoft’s Paolo Costa said they’re aiming to commercialize the system late in 2027, following a proof-of-concept that shrank the hardware down to a thumb-sized transceiver, ready to slot into today’s data-center equipment.
Doug Burger, Microsoft technical fellow, called the effort “a major leap in AI datacenter efficiency.” Frank Rey, who leads Azure Hyperscale Networking at Microsoft, pointed to MicroLED’s “pure efficiency of LED over a laser,” noting the impact on power consumption at data center scale. MediaTek
Ron Westfall, vice president and analyst at HyperFrame Research, figures Microsoft might get a leg up here by “breaking the trade-off between power consumption and data volume.” Should those lab numbers translate in the real world, he added, the company’s costs for building out denser AI clusters could go down. DataCenterKnowledge
The project drops into a larger fight over the wiring of AI clusters. Reuters noted ahead of Nvidia’s annual conference that analysts were watching for details on why the chipmaker put money into laser firms Lumentum and Coherent, with Nvidia betting on more optical links deep inside sprawling AI setups—even as scaling up those systems cheaply is still a big challenge.
Alongside its MicroLED rollout, Microsoft is turning to hollow-core fiber for longer inter-facility connections. According to the company, some Azure regions are already running on hollow-core fiber, which it says delivers data up to 47% faster and reduces latency by around 33% versus standard single-mode fiber.
The MicroLED setup hasn’t hit commercial markets yet; its power efficiency numbers come out of lab environments and modeled deployments, not actual production data. Other options haven’t stood still either. Investor appetite for heavy AI infrastructure costs has worn thin. Back in January, Reuters pointed to Microsoft’s record AI spending and slowing cloud momentum, which triggered a drop of over 6% for the stock after hours.
Right now, the cable project is part of Microsoft’s broader push to lighten the energy load from its AI expansion. In February, Reuters said the company was looking into using superconducting power lines within its data centers. Microsoft has also promised to keep purchasing renewable energy equal to its total electricity consumption.
