Huatai Securities Forecasts AI-Driven Growth in the Switching Chip Market Starting in 2026

Huatai Securities' research report states that switching chips, as core components for data center interconnects, are used to handle data switching and packet forwarding, accounting for over 30% of switch costs. Huatai Securities is optimistic about a second growth phase for switching chips starting in 2026, driven by AI: 1. Clusters exceeding 10,000 GPUs require more stable and reliable network systems, driving Scale-out switches toward higher capacity and speed, which is expected to lead to simultaneous growth in both volume and price for Scale-out switching chips; 2. The hyper-node architecture may be the breakthrough path for domestic computing power to catch up with overseas capabilities, as hyper-nodes amplify Scale-up effects within clusters, typically requiring a higher ratio of switching chips compared to Scale-out architectures, potentially generating substantial future demand for switching chips. Huatai Securities estimates that the domestic switching chip market could reach RMB 24.2 billion by 2028, with a CAGR of 96% from 2026 to 2028, and recommends monitoring leading international players and domestic companies with advanced self-developed chip technologies.