The optical modules market is shifting
JPMorgan said in an Aug. 6 research note that the data communications market will expand at a 28% compound annual growth rate over the next five years, reaching more than $70 billion by 2030. The bank said 1.6T products will be the largest source of incremental growth, with a CAGR of about 120% and roughly $40 billion in contribution by 2030.
On structure, pluggable optics are still expected to lead growth through 2028. After that, NPO and CPO are set to take over the incremental gains. JPMorgan said its latest forecast was raised by about 15% overall, with 1.6T accounting for roughly 35% of the increase, while 800G and the rest of the market were broadly unchanged.
NPO and CPO gain share into 2030
After NPO was included in the addressable market calculation, JPMorgan said the NPO/CPO market should exceed $18 billion by 2030, equal to more than 25% of the overall data center communications market. Compared with April, average forecasts for 2026 and later were raised by more than 50%.
The bank expects pluggable optics to add $14 billion between 2026 and 2028, while LRO/LPO, NPO and CPO each add less than $3 billion. Between 2028 and 2030, the mix changes: NPO adds $9 billion and CPO adds $6 billion, while pluggable optics and LRO/LPO each add less than $2 billion.
JPMorgan said CPO is more evenly split between scale-up and scale-out deployments. NPO faces more limits in scale-up use because signals must travel through longer copper traces, which adds latency. By 2030, only 33% of NPO deployments are expected to be tied to scale-up, while NPO and CPO together should exceed $18 billion, with about 40% of deployments aimed at scale-up.
Google and Meta are set to be major buyers
JPMorgan said Google could become the largest customer for data center communications optical devices by 2030. Google and Meta are also expected to rank as top customers in NPO/CPO.
The report said the five largest U.S. cloud providers will grow at a 29% CAGR, in line with the broader market, and together hold more than 60% of market share. Google and Meta are expected to grow faster than the industry average. By 2030, Meta is set to lead NPO/CPO deployments, followed by Google, Microsoft, Amazon and Oracle.
Nvidia may rebound near term, but not in the long run
JPMorgan expects Nvidia to regain share in the near term thanks to its dominance in 1.6T. In 2026, its overall share in the data center market is expected to recover to 25%, while its share in the 1.6T market should exceed 70%.
Longer term, the bank expects Nvidia's market share to fall from 18% in 2025 to 12% in 2030 as cloud providers buy more from third-party vendors.
Telecom and data center interconnect also expand
JPMorgan also sees the telecom and data center interconnect market growing at an 18% CAGR through 2030, from $4 billion in 2025 to $9 billion. 1.6T is the main driver, with a CAGR above 100% and more than $3 billion in contribution by 2030. 800G is expected to grow at a 40% CAGR and contribute about $3 billion over the same period.
The latest forecast for this segment was lifted by 11% on average, mainly because of the high-speed optical module market in ZR form factors.
Short-term views on COHR, LITE and FN
On stocks, JPMorgan said COHR has the clearest earnings visibility. The bank said COHR is steadily ramping capacity, with revenue and margins expected to keep improving in the second half. Telecom and data center infrastructure demand remains strong, and optical module and CPO expansion is progressing as expected. At the current share price, COHR trades at 23 times expected fiscal 2028 EPS.
For LITE, JPMorgan said concerns are overstated. The main debates are threefold: higher TRx revenue could weigh on gross margin, Chinese competitors increasing indium phosphide (InP) supply could create longer-term risk, and CPO capacity expansion could be delayed. JPMorgan said these issues should not show up meaningfully in the upcoming earnings report. Faster Google TRx growth will pressure margins, but that should be offset by growth in higher-margin telecom/DCI and EML businesses. LITE currently trades at 22 times expected fiscal 2028 EPS, and cautious positioning before earnings leaves room for upside if results beat expectations.
FN is seen as the hardest to call. JPMorgan said the June quarter may be soft, with little meaningful improvement in EML supply, and the key will be guidance for the September quarter. Management needs to show faster growth, especially in optical modules and high-performance computing. The report also said Nvidia-related EML capacity will rise, Amazon Web Services' optical module business continues to grow, and Trainium/HPC revenue could reach $150 million. FN trades at 23 times expected fiscal 2028 EPS, in line with COHR and LITE, but with lower earnings growth potential and a less attractive risk-reward setup.
JPMorgan's bottom line was that the long-term story is changing: pluggable optics will lead growth through 2028, while NPO and CPO take over the incremental gains after that. Google and Meta are reshaping the customer map, and Nvidia's near-term 1.6T share rebound does not change the long-term trend.