Optical networking is emerging as the next major trend in artificial intelligence (AI) infrastructure as growing AI computing demand drives the need for faster data exchange, lower latency and larger GPU clusters, according to a report by Goldman Sachs.

The report stated that networking is becoming a key component in unlocking computing capability for AI chips by connecting multiple chips together and enabling seamless communication between them. "Networking is the next frontier in AI infrastructure, poised to enhance computing capability through seamless data exchange and low latency," the report said.

Optical networking is a communications system that transmits data as pulses of light through hair-thin glass or plastic fibre-optic cables. It replaces traditional electrical signals over copper wires, delivering massive bandwidth and extremely high-speed.

According to Goldman Sachs, the rapid expansion of AI infrastructure and increasing computing power per rack are expected to create strong growth opportunities across all networking configurations. The report estimated that the total addressable market (TAM) across scale-up and scale-out networking could increase nearly nine times to $154 billion by 2028 from around $15 billion in 2026.

Goldman Sachs said scale-up networking, which involves adding more GPUs and computing resources within the same server rack or across connected racks, is expected to account for around 69 per cent of the total $154 billion TAM, equivalent to nearly $106 billion.

The report also noted that Co-Packaged Optics (CPO) is expected to play a major role in future AI networking systems.According to the report, CPO could contribute around $91 billion, or 59 per cent of the total $154 billion market opportunity, assuming a 29 per cent penetration rate in scale-out networking.

Published on May 19, 2026