3M finds a data center opening in the AI fiber buildout

3M is trying to turn a niche fiber-optic product into a bigger growth story tied to artificial intelligence data centers. For everyday investors, the point is scale: the business is still small inside 3M, but CEO Bill Brown says demand from large cloud operators could lift it several times over.

Brown told CNBC’s “Mad Money” on Tuesday that 3M’s expanded beam optical connectivity technology can reduce fiber installation time for hyperscalers by as much as 85%. Hyperscalers are the large cloud and internet infrastructure companies that build enormous data centers, including facilities used to train and run AI systems.

The shift Brown described is from copper networking to fiber-optic networking. Copper cables transmit electrical signals, while fiber sends data using light, which can help handle the higher data demands created by AI workloads.

How 3M’s technology fits in

3M’s product is called expanded beam optical connectivity. Brown said the technology spreads light over a wider area before reconnecting it, rather than relying on the more typical point-to-point fiber connection.

That design, according to Brown, makes the connection less vulnerable to dust and vibration, both of which can interfere with data transmission. In data centers, where companies may need to install large amounts of networking gear quickly, fewer disruptions and faster setup can matter.

Brown said 3M has built an intellectual property position around the product, with 100 patents in the area and another 50 pending.

Microsoft certification gives the product a test case

Microsoft has certified 3M’s technology for use in Azure data centers after several years of testing, according to Brown and a Microsoft announcement cited by CNBC. Azure is Microsoft’s cloud computing platform.

Brown also said 3M is running trials with other hyperscalers. He did not name those companies in the CNBC interview.

For 3M, the AI link is unusual because the company is better known to consumers for products such as Post-it notes and Scotch tape. The broader company remains an industrial conglomerate, and Wall Street expects it to generate about $25 billion in annual sales this year, according to CNBC.

A small business with bigger targets

On 3M’s earnings call Tuesday, Brown said expanded beam optical connectivity is expected to produce $40 million to $50 million in revenue this year. He said the business could grow four to five times over the next several years as more hyperscalers adopt fiber-optic networks.

Brown estimated the total addressable market, meaning the potential annual revenue opportunity if suppliers served the full market, at about $1 billion this year. He said that market could reach roughly $2 billion by 2028.

3M is preparing for more demand. Brown said the company plans to double production capacity this year, then double it again over the following 12 to 18 months. Even with that expansion, he said 3M expects to use contract manufacturers and a wider supplier network to keep up.

The numbers show why investors may watch the business without treating it as the whole 3M story. A $40 million to $50 million revenue line is small beside a company expected to bring in about $25 billion this year, but the product puts 3M in one of the most heavily funded areas of tech infrastructure: the race to build data centers for AI.

This story draws on original reporting from CNBC.