Goldman Sachs raised its forecasts for the global optical module market in a September industry report, projecting market value at $68 billion in 2026, $131 billion in 2027, and $148 billion in 2028. Those figures are 33%, 81%, and 115% above its previous estimates. The bank said rising network bandwidth demand from AI data centers is pushing the sector into a cycle of higher volumes and higher pricing.
Goldman Sachs lifts outlook for high-speed optical modules
According to the report, the main drivers behind the upward revision are the expansion of rack-scale AI servers and ASIC servers, a higher number of optical modules used per GPU, and continued migration toward 1.6T and 3.2T products. Goldman Sachs said the compound annual growth rate for the 800G-and-above optical module segment stands at 69%.
The bank increased its shipment forecast for 800G-and-above optical modules from 59.7 million, 104 million, and 126 million units in 2026 through 2028 to 78.2 million, 144 million, and 171 million units. That represents upward revisions of 31%, 39%, and 36%, respectively.
Products at 1.6T and above showed the fastest growth in the forecast. Goldman Sachs said that segment is expected to grow 29%, 61%, and 50% in 2026, 2027, and 2028. For 2026, it expects 800G shipments at 45 million units and 1.6T shipments at 33 million units. In 2027, those figures rise to 49 million and 71 million units.
The report also highlighted a sharp increase in 3.2T adoption. Goldman Sachs expects 3.2T shipments to rise from 23 million units in 2027 to 68 million units in 2028. By 2028, 3.2T is expected to account for 40% of high-speed optical module shipments, compared with almost zero in 2026.
Rack-scale AI servers and ASIC servers seen as core demand drivers
Goldman Sachs said AI servers are moving from single-card systems to rack-scale deployments, and that shift provides structural support for the higher demand outlook. Denser rack architectures require more GPU interconnects, which in turn raises the number of optical modules used per rack by a multiple.
The bank expects NVIDIA rack-scale AI server shipments to reach 50,000 racks in 2026, 92,000 in 2027, and 148,000 in 2028. For AMD, it forecasts 5,000, 13,000, and 15,000 racks over the same period.
Goldman Sachs said the expansion of ASIC servers is also important. It expects ASIC chips to account for 50%, 52%, and 55% of total AI chip volume in 2026, 2027, and 2028. The report said GPU servers usually deploy two to three optical modules per GPU, while ASIC servers use more optical modules because lower compute power per chip makes them more reliant on network interconnects to distribute workloads.
Silicon photonics gains on cost
On technology, Goldman Sachs said silicon photonics is becoming the mainstream route for high-speed optical modules, with cost as the main reason.
Its estimate shows that a 1.6T silicon photonics optical module uses four 70mW CW lasers, with laser cost at about $15 to $20. A 1.6T EML solution uses eight 200G EML lasers, with laser cost at about $160. On lasers alone, the silicon photonics approach has a cost advantage close to an order of magnitude.
Goldman Sachs expects silicon photonics penetration in 800G-and-above optical modules to increase from 68% in 2026 to 74% in 2028. In faster products such as 1.6T and 3.2T, the share is higher, at 60%, 80%, and 80% from 2026 to 2028.
CPO remains early-stage
The report also pointed to CPO, or co-packaged optics, as another technology path now taking shape. Goldman Sachs expects CPO penetration in 800G-and-above optical modules to rise from 1% in 2026 to 9% in 2028.
It said CPO is still in an early stage. As integration between switch chips and optical engines improves, the report expects clearer volume growth to appear in 2027 and 2028.
Supply chain names covered in the report
Goldman Sachs said it assigned buy ratings across multiple parts of the optical module supply chain covered in the report.
- Optical module or optical engine manufacturers: Eoptolink and FOCI
- CW laser or epitaxial wafer suppliers: LandMark and VPEC
- Equipment supplier: RoboTechnik
The report said faster adoption of silicon photonics creates structural pressure for traditional EML laser suppliers. CW laser suppliers and integrated silicon photonics solution providers stand to benefit from the product mix shift. Over a longer horizon, Goldman Sachs said the CPO trend could open new incremental demand for optical engine and packaging equipment suppliers.
Growth is shifting from unit volume to product specification
Goldman Sachs said the optical module market is moving from a volume-driven model to one shaped by product specification. Shipment growth is slowing, but value per unit is rising. Prices for 1.6T and 3.2T products are well above 800G, and the cost advantage of silicon photonics is accelerating that upgrade cycle.
The bank said that when the selling price of each optical module moves from the hundreds of dollars into the thousands, market expansion can outpace shipment growth.