Data center scale-up to drive Ethernet TAM to beyond $250B

Bandwidth required for scale-up Ethernet in AI racks will continue to exceed scale-out requirements, according to Crehan Research.
Jan. 6, 2026
2 min read

Key Highlights

  • Data center infrastructure is rapidly evolving to meet AI and cloud networking demands, with a focus on scale-up rather than scale-out strategies.
  • Crehan Research forecasts a $250 billion market for Ethernet switch sales over the next five years, driven by increased bandwidth requirements.
  • Bandwidth for scale-up Ethernet in AI racks is expected to grow 15 times, with a 200-fold increase in switching bandwidth projected in the same period.
  • The rollout of 1.6Tbps Ethernet switches will address both scale-up and scale-out needs, optimizing accelerator performance and network capacity.
  • The deployment of 800GbE and 1.6Tbps switches is accelerating, supporting the exponential growth in data center connectivity driven by AI and high-performance computing.

As the demands of AI and cloud networking push data center infrastructure beyond initially expected limits, there will be a rapid increase in Ethernet switch deployments to scale up AI rack systems. 

A new Crehan Research report found that scale-up will drive total sales to exceed $250 billion over the next five years.

Scaling up data centers means increasing the power, memory, processors, or storage within existing servers or systems (vertical scaling), strengthening a single machine rather than adding more machines (scale-out/horizontal scaling).

Surpassing scale-out bandwidth

A key trend driving the scale-out growth is bandwidth requirements.

Crehan forecasts that the ramp in scale-up will have an even more profound impact on total market bandwidth, driving a 15-fold increase in the next five years.

“The bandwidth required for scale-up Ethernet in AI racks is about an order of magnitude greater than that required for scale-out, and this difference is likely to increase," said Seamus Crehan, president of Crehan Research. "We are projecting a 200-fold increase in scale-up Ethernet switching bandwidth alone.”

1.6T Ethernet ramping

As scale-up Ethernet switching bandwidth continues to grow, it will create an opportunity for 1.6 Tbps.

The advent of 1.6 Tbps technology will address both scale-up and scale-out opportunities, with a significant push to optimize scale-up connectivity to maximize accelerator performance.

Coinciding with the expected exponential growth in scale-up Ethernet switching and the rapid expansion of scale-out and scale across deployments, Crehan’s report projects a fast ramp in 1.6T Ethernet switch ports, starting later this year.

“Fueled by generative AI network buildouts, data center 800GbE switch ports have seen the fastest ramp in history, and our latest forecast projects an even faster ramp for the upcoming 1.6T generation," Crehan said.

For related articles, visit the Data Center Topic Center.
For more information on high-speed transmission systems and suppliers, visit the Lightwave Buyer’s Guide.
To stay abreast of fiber network deployments, subscribe to Lightwave’s Service Providers and Datacom/Data Center newsletters.

About the Author

Sean Buckley

Sean is responsible for establishing and executing the editorial strategy of Lightwave across its website, email newsletters, events, and other information products.

Sign up for our eNewsletters
Get the latest news and updates