Written by: Rita
The network bandwidth demands of AI data centers are driving the optical module market into a period of simultaneous volume and price growth.
In September, Goldman Sachs released a global optical module industry report, raising its forecast for the global optical module market value in 2026, 2027, and 2028 to $68 billion, $131 billion, and $148 billion, respectively—an increase of 33%, 81%, and 115% compared to previous estimates. The compound annual growth rate for the high-speed optical module market of 800G and above is projected at 69%. Goldman Sachs attributes this upward revision primarily to the expansion of rack-level AI and ASIC servers, increased optical module usage per GPU, and the ongoing transition to higher specifications such as 1.6T and 3.2T.
Rack-level AI servers are driving the mass adoption of high-speed optical modules.
AI servers are evolving from single-card to rack-level configurations, providing a structural foundation for significantly increased demand for optical modules.
Goldman Sachs raised its shipment forecasts for 800G and higher optical modules from 59.7 million, 104 million, and 126 million units for 2026 to 2028 to 78.2 million, 144 million, and 171 million units, representing increases of 31%, 39%, and 36%, respectively. Among these, products of 1.6T and above showed the most significant growth rates, increasing by 29%, 61%, and 50% in 2026 to 2028, respectively.
Specifically, the shipment volumes for 800G and 1.6T are expected to reach 45 million and 33 million units in 2026, respectively; by 2027, these figures are projected to increase to 49 million and 71 million units. The 3.2T segment is forecast to grow from 23 million units in 2027 to 68 million units in 2028. The rapid adoption of 3.2T represents the most significant structural change in this forecast, with 3.2T accounting for 40% of high-speed optical module shipments by 2028—nearly zero in 2026.
The expansion of rack-level AI servers is the primary driver. Goldman Sachs forecasts NVIDIA's rack-level AI server shipments at 50,000, 92,000, and 148,000 racks in 2026, 2027, and 2028, respectively, while AMD's shipments are projected at 5,000, 13,000, and 15,000 racks over the same period. Higher-density rack architectures imply greater demand for GPU interconnects, driving a multiple-fold increase in optical modules per rack.
The expansion of ASIC servers is equally important. Goldman Sachs expects ASIC chips to account for 50%, 52%, and 55% of total AI chips from 2026 to 2028, respectively. Unlike GPU servers, which typically configure 2 to 3 optical modules per GPU, ASIC servers, due to their relatively lower single-chip computing power, rely more heavily on network interconnectivity to distribute workloads, resulting in higher optical module usage.
The silicon photonics solution offers significant cost advantages, with adoption rates exceeding 1.6T continuing to rise.
Silicon photonics is becoming the dominant technology for high-speed optical modules, primarily driven by cost.
Goldman Sachs estimates that a 1.6T silicon photonic optical module uses four 70mW CW lasers, with laser costs of approximately $15 to $20; in contrast, a 1.6T EML solution uses eight 200G EMLs, with laser costs of approximately $160. Just for the lasers alone, the silicon photonic solution offers a cost advantage of nearly an order of magnitude.
Goldman Sachs expects the adoption rate of silicon photonics in 800G and higher optical modules to rise from 68% in 2026 to 74% in 2028. In higher-speed products such as 1.6T and 3.2T, silicon photonics accounts for an even higher share, at 60%, 80%, and 80% respectively from 2026 to 2028.
Co-packaged optics (CPO) is another emerging technology trend. Goldman Sachs expects CPO penetration in 800G and higher optical modules to rise from 1% in 2026 to 9% in 2028. CPO is still in its early stages, but significant volume growth is expected between 2027 and 2028 as switch chips become more integrated with optical engines.
Supply chain beneficiaries
Goldman Sachs covers multiple segments of the optical module supply chain in this report and assigns a Buy rating to all.
For optical modules or optical engines, we recommend Eoptolink and FOCI. For CW lasers or epitaxial wafers, we recommend LandMark and VPEC. For equipment, we recommend RoboTechnik.
The accelerating adoption of silicon photonics solutions is placing structural pressure on traditional EML laser suppliers, while CW laser suppliers and silicon photonics integration providers will benefit from product portfolio upgrades. The long-term trend toward CPO opens new incremental opportunities for optical engine and packaging equipment suppliers.
The optical module market is transitioning from a quantity-driven to a specification-driven model. While shipment growth is slowing, unit value is increasing. The unit prices of 1.6T and 3.2T products are significantly higher than those of 800G, and the cost advantages of silicon photonics solutions are accelerating this upgrade cycle. As the price per optical module rises from hundreds to thousands of dollars, market size expansion will far outpace shipment growth.
Disclaimer
This article is a compilation and interpretation by Chaoxiang Research of a third-party brokerage research report (Goldman Sachs, September 7, 2026), combined with publicly available market information. The ratings, price targets, earnings forecasts, and related judgments cited herein reflect the views of the brokerage’s analysts and represent the position of their respective institution only; they do not reflect the views of Chaoxiang Research nor constitute any investment advice.
The market carries risks; make decisions independently. This article should not be used as a basis for buying or selling any securities.