Market forecast and growth trajectory
Bank of America analysts increased their estimates for the artificial intelligence optics market after the 2026 Optical Fiber Communications conference in Los Angeles this week, forecasting a potential total addressable market of $90 billion by 2030. The projection aligns with industry commentary from suppliers and chipmakers presented at the event.
Lumentum cited a base market of $18 billion in 2025 and expects the sector to expand at roughly a 40% compound annual growth rate from that level. The expansion Lumentum described covers a broad set of technologies, including pluggable optics, lasers, co-packaged optics, optical circuit switches, data center interconnect and other related solutions.
Drivers behind the surge
Networking limitations are increasingly prominent as hyperscalers scale up compute clusters and link more nodes. The industry view is that copper cabling remains effective for short reaches under 10 meters, but optical technologies will take on a larger role as companies interconnect geo-dispersed data centers and extend reach beyond copper's practical limits.
At GTC, Nvidia introduced Spectrum-6 and Spectrum-7 co-packaged optics scale-out switches for Rubin and Feynman, together with NVLink-8 co-packaged optics scale-up for Feynman. Those announcements were cited as confirmation that co-packaged optics are moving into adoption. Some industry estimates shared at the conference suggested that as much as 30% of optical ports could deploy co-packaged optics by 2030.
Scale-up versus scale-out and timing
Analysts at the conference pointed to a large differential between scale-up and scale-out co-packaged optics. Scale-up implementations are estimated to be three to four times larger than scale-out in terms of addressable market, although deployment could be staggered. The expectation is that longer-reach, multi-rack scale-up links will convert to optical first, with that shift occurring in the 2027 to 2029 window, while intra-rack connections are likely to remain copper for a longer period.
Optical circuit switches and supplier outlooks
Optical circuit switches are gaining traction as more use cases emerge and hyperscalers show interest. Coherent quantified the opportunity, seeing a $4 billion total addressable market for optical circuit switches by 2030. Separately, Coherent described an accelerating path toward a $70 billion overall total addressable market by 2030, which includes roughly $20 billion attributed to new growth engines.
Lumentum provided a company-level revenue model that targets $2 billion in quarterly sales within the next 18 to 24 months. The firm noted that this model may be conservative because it does not incorporate capacity from a newly acquired fabrication facility that has an annual sales capacity of $5 billion. Lumentum also suggested that earnings per share could exceed $30 by the second half of 2027 under that model.
Competitive positioning and components supply
Several suppliers were highlighted for roles across the stack. Marvell Technology was noted for offering an end-to-end portfolio spanning modules, switches, co-packaged optics and scale-across technologies. Credo Technology was identified as retaining its automotive ethernet controller franchise. Macom Technology was described as a supplier of key components such as equalizers, trans-impedance amplifiers, photodiodes and chipsets that serve both copper and optical protocols.
Bottom line
Industry participants and analysts at the OFC conference painted a picture of rapid growth for AI-related optical products, driven by hyperscaler demand, announcements from major compute and switch vendors, and an expanding supplier ecosystem. The combined commentary supports a materially larger market outlook by 2030, though timing and adoption patterns are expected to vary across technologies and link types.