Goldman Sachs predicts $154bn optical market

Goldman Sachs Research said on May 12 that the total addressable market for AI networking infrastructure could rise nearly ninefold to $154 billion by 2028, from about $15 billion in 2026. The bank’s report, published on its Insights site, said the jump would be driven by the need to move more data between increasingly dense AI compute systems. ET Telecom and ANI reported the forecast on May 19, citing Goldman Sachs’ view that optical networking is becoming a central part of the AI build-out rather than a supporting component. ### Where does the $154 billion number come from? Goldman Sachs said the forecast covers AI networking infrastructure across both “scale-up” and “scale-out” configurations. In the bank’s framing, scale-up refers to adding more GPUs and compute resources within the same rack or across tightly connected racks, while scale-out refers to linking larger clusters across systems. Goldman Sachs said rising computing power per rack and a broader AI infrastructure ramp-up were expected to lift demand across all configurations. (goldmansachs.com) The report said scale-up networking could account for about 69% of the total opportunity, or roughly $106 billion. BusinessWorld and ANI, citing the Goldman Sachs research, also said co-packaged optics could contribute about $91 billion, or nearly 59% of the total market opportunity, assuming a 29% penetration rate in scale-out networking. (goldmansachs.com) ### Why is optical networking getting this much attention now? Goldman Sachs said networking is becoming “the next frontier in AI infrastructure,” because larger AI systems need faster data exchange and lower latency between chips and clusters. The bank tied that demand to bigger GPU clusters and to the limits of copper-based connections as bandwidth requirements rise. Its report said optical links are increasingly needed to connect compute resources efficiently as AI systems scale. (bwcfoworld.com) ET Telecom, citing the Goldman Sachs note, said optical networking transmits data as pulses of light through fibre-optic cables and is being positioned as a way to deliver higher bandwidth and speed for AI workloads. Goldman Sachs’ report also pointed to component categories including pluggable optical modules, copper cables, co-packaged optics and PCB midplanes as part of the market expansion it expects through 2028. (goldmansachs.com) ### What does that mean for firms that buy premium network capacity? The Goldman Sachs forecast is about AI infrastructure, but it also points to heavier demand for the same high-performance optical components used in other latency-sensitive environments. The report itself does not make a trading-industry forecast, but its numbers indicate that transport, switching and interconnect spending are likely to become a larger part of infrastructure budgets as AI clusters expand. (goldmansachs.com) That is an inference based on Goldman Sachs’ market-size projection and its emphasis on low-latency data exchange. For low-latency trading teams, that matters because cross-connects, optical modules and specialized interconnect gear sit inside the same broader supply chain. Goldman Sachs did not publish a direct forecast for trading-network costs in the material reviewed, but the bank’s projection of a ninefold expansion in AI networking demand suggests continued pressure on premium capacity planning. That is also an inference drawn from the report’s demand outlook. (goldmansachs.com) ### Which parts of the network stack look most exposed? Goldman Sachs highlighted co-packaged optics as one of the largest opportunity areas inside the build-out. BusinessWorld, citing the report, said CPO could represent about $91 billion of the total market if adoption reaches Goldman Sachs’ assumed penetration levels. That focus suggests the biggest spending growth is expected in the highest-bandwidth parts of the stack, where power, density and latency constraints are tightest. (goldmansachs.com) The Goldman Sachs report was published on May 12 on the firm’s Insights site under the title “Optical Networking: The Next Mega Trend in AI Infrastructure.” ET Telecom and ANI carried summaries on May 19, and those reports identified the same 2028 market target, the 2026 base of about $15 billion and Goldman Sachs’ argument that AI growth is pushing networking into a larger investment category. (goldmansachs.com) (bwcfoworld.com)