Ongoing investments by cloud providers in data centers are spurring a new growth trajectory for the optical transceiver market.
A new Light Counting report revealed that a “surge” in AI development created a new wave of demand for optical connectivity in 2023-2025. This will sustain the market’s growth through 2030.
In its latest forecast, the research firm predicts “strong growth” for sales of Ethernet optical transceivers, including re-timed modules, linear drive pluggables (LPO), and co-packaged optics (CPO).
One key area that will be key in future optical growth will be the use of optical connectivity in AI scale-up networks.
Between 2026 and 2030, LightCounting expects co-packaged optics (CPO) to emerge as the best option for connectivity in scale-up networks, due to higher bandwidth density and reliability.
Further, as enthusiasm around AI inevitably tapers off, the research firm said it projects 30-35% annual growth in 2025 and 2026 and 15-20% in 2027-2030.
It appears that the Trump administration’s trade war is not holding up optical transceiver sales to US-based cloud companies or is causing glitches in the broader supply chain right now.
Additionally, LightCounting increased its 800G ZR/ZR+ transceiver forecast in 2026-2027 because it said “customers are accelerating transition from on-board to pluggable DWDM modules and using them directly on switches and routers.”
Because AI clusters no longer fit into a single building, LightCounting raised the forecast for coherent-lite transceivers, included in the Ethernet market segment.
In instances where electricity availability is lacking, GPUs need to be installed across various locations. The only thing holding back the build-out of distributed AI clusters is latency.
LightCounting said that “coherent-lite transceivers will address this emerging market opportunity.”
