AI applications to dominate the Ethernet transceivers market between 2026-2030
AI continues to influence the Ethernet transceiver market.
In its latest Ethernet Optics report, LightCounting said the demand from AI applications will continue to dominate the market in 2026-2030, exceeding the research firm’s previous expectations.
LightCounting’s forecast looks at retimed transceivers, LPO and CPO used in scale-out and scale-up networks.
“From this perspective, AI has taken full control of the market,” the research firm said.
Bracing for market correction
While Ethernet optical transceiver sales doubled in 2024, LightCounting noted it could have doubled again in 2025 if the InP chip suppliers had more capacity.
The research firm said it expects shortages for EML and CW laser chips will limit market growth until the end of 2026. However, it added that the demand may also moderate by that time, helping to restore an equilibrium across the supply chain.
“Our forecast projects for a soft landing, but a supply chain equilibrium is often restored by a market correction,” LightCounting said. “The sooner such correction comes, the less painful it will be.”
A sober look
Given the excitement generated by AI, a key consideration is what is driving investment?
LightCounting said that industry watchers should take a “sober look” at how the AI market is playing out.
Early investments were driven by the interest in ChatGPT, developed by OpenAI in partnership with Microsoft.
Google’s role should not be overlooked. To maintain its position in the web search arena, the company invested heavily in Gemini, which is now offering a similar platform to ChatGPT.
The research firm said that “targeted advertising enabled by AI-enhanced search engines is a huge and highly profitable business where Google competes with Microsoft,” showing that the “current levels of AI investments by these two companies are well justified.”
Looking forward, the next question is what other AI-enabled business could turn a profit?
Since most of the next use cases for AI are still being developed and it's unclear if they will be successful, LightCounting said it “is only a matter of time before investors lose patience and take their money off the table.”
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About the Author
Sean BuckleySean Buckley
Sean is the Editor-in-Chief of Lightwave. He establishes and executes Lightwave's editorial strategy across its website, email newsletters, events, and other information products. Before coming to Lightwave in July 2023, he served as editor of Broadband Communities. Earlier, he served as senior editor of FierceTelecom and the editor of the former Telecommunications Magazine. He got his start in the optical industry in 1998 when he became the editor of enterprise and optical networks at Information Gatekeepers. He has a BA in English from the University of Massachusetts, Boston, and lives in Dracut, Mass, with his wife, two sons, and his cat, Dove.
