AI data center expansion accelerates, global AI optical module market expected to reach $26 billion by 2026

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The global AI optical transceiver module market is entering a period of rapid expansion, but structural constraints in the supply chain are becoming increasingly prominent.

On April 20, according to the latest research from TrendForce, the global AI optical transceiver module market size is expected to increase from $16.5 billion in 2025 to $26.0 billion in 2026, with a year-over-year growth of over 57%.

Pressure on the supply side is rising at the same time. The supply of core optoelectronic chips, represented by Electro-Absorption Modulated Lasers (EML) and Continuous Wave Laser Diodes (CW-LD), continues to be tight, becoming the primary bottleneck restricting capacity expansion.

Demand Side: North American Hyperscale Data Centers Continue to Drive Procurement of 800G and Above Modules

AI data centers are continuously expanding, driving a sharp increase in demand for 800G and higher-speed optical transceiver modules.

TrendForce points out that hyperscale data center traffic in North America is maintaining annual growth rates of over 30%, prompting cloud computing giants like Google, Microsoft, and Meta to continually expand their deployment of GPUs and AI servers, further boosting demand for high-speed optical interconnect products.

Behind the demand growth is the rigid dependence of AI server clusters on high-bandwidth, low-latency optical links. 800G optical modules have now become the mainstream specification for backbone connections in AI data centers, and as 1.6T products gradually enter mass production, the next upgrade cycle has begun ahead of schedule.

TrendForce also notes that the growth logic of the AI optical module market is evolving from single product specification upgrades to a parallel drive across three tracks: market expansion, generational technology iteration, and diversification of application scenarios. The rise of edge computing and Data Center Interconnect (DCI) demand will simultaneously drive the market expansion of 800G and 1.6T ZR/ZR+ coherent optical modules.

Supply Side: EML Chips and Other Core Components Shortages Become Primary Bottleneck for Expansion

While demand is strong, structural supply-side constraints are becoming increasingly evident. TrendForce has identified several critical bottlenecks restricting capacity expansion.

The primary issue is tight supply of core optoelectronic chips. Key components like EML lasers and CW-LD are limited by capacity allocation, and supply remains tight.

Meanwhile, high-precision manufacturing processes such as optical alignment also restrict large-scale capacity growth, and challenges in power consumption and heat dissipation management continue to impact system design and deployment timelines.

In response, upstream buyers such as Nvidia have turned to long-term agreements (LTA) to secure key components, and the technological direction is also rapidly shifting toward low-power linear pluggable optics (LPO) and silicon photonics integration to replace traditional high-power DSP architectures and fundamentally alleviate constraints related to power and heat dissipation.

Industry Layout: International Firms and the Taiwan Supply Chain Accelerate Positioning in the 1.6T Track

Facing the dual pressures of tightening component supply and generational technology shifts, all parties in the industry chain are already deploying new rounds of capacity expansion and technology development.

Internationally, leading firms such as Coherent, Lumentum, and Applied Optoelectronics have begun capacity expansion and technology deployments. In Taiwan, ELASER and LuxNet Corporation are also simultaneously advancing corresponding expansions and technology deployment.

TrendForce notes that this upgrade cycle brings notable structural growth opportunities to the Taiwan optical communication supply chain. Taiwanese manufacturers have established a robust foundation in contract manufacturing services, EML laser chips, passive optical components, and module packaging/testing, and continue to advance in the directions of silicon photonics and LPO technology.

TrendForce emphasizes that 2026 to 2027 are key time nodes for Taiwanese manufacturers to enter the 1.6T supply chain. Whether they can successfully complete design implementation at first-tier customers will largely determine their market share structure in the next-generation optical module market.

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