The global co-packaged optics (CPO) market is entering a decisive decade. As artificial intelligence workloads push data center networks to their physical and economic limits, co-packaged optics is emerging as a foundational technology for next-generation AI infrastructure. The newly released Global Co-Packaged Optics Market 2026–2036 report from ResearchAndMarkets.com provides a comprehensive analysis of how CPO will reshape data center interconnect architectures worldwide.
Why Co-Packaged Optics Is Critical for AI Data Centers
Hyperscale data centers supporting large language models, generative AI, and advanced machine learning are facing escalating challenges in bandwidth density, power efficiency, and latency. Traditional pluggable optical modules can no longer scale efficiently to meet these demands.
Co-packaged optics addresses these constraints by integrating optical transceivers directly with switch ASICs or processors within the same package. This architectural shift dramatically shortens electrical interconnect paths, reducing power consumption from approximately 15 picojoules per bit to around 5 picojoules per bit, with a roadmap toward sub-1 picojoule per bit efficiency. At the same time, CPO enables the bandwidth densities required for switches operating at 51.2 terabits per second and beyond.
Market Segmentation: Scale-Out vs. Scale-Up Networks
The report identifies two primary application segments shaping CPO adoption:
Scale-Out Networking
Scale-out applications support traditional data center fabrics based on Ethernet or InfiniBand, connecting racks and clusters across facilities. These environments benefit from CPO’s ability to deliver higher throughput while reducing power consumption at scale.
Scale-Up AI Interconnects
Scale-up applications focus on GPU-to-GPU and accelerator interconnects within AI training clusters. Here, optical I/O enabled by CPO is positioned as a replacement for copper-based technologies, offering superior reach, bandwidth, and energy efficiency. Initial commercial deployments are expected to occur in scale-up AI environments before broader expansion into scale-out networks.
Industry Momentum: NVIDIA, Broadcom, and Foundry Leadership
The CPO ecosystem reached a major inflection point following NVIDIA’s announcement of its Spectrum-X and Quantum-X silicon photonics switches at GTC 2025. Built using TSMC’s advanced 3D hybrid bonding technologies, these platforms signal strong commitment from the dominant AI infrastructure provider.
Broadcom has taken a complementary approach with its Bailly CPO platform, emphasizing openness and interoperability across multiple photonics and packaging partners. Together, these strategies underscore growing industry consensus that co-packaged optics is essential for the future of AI networking.
Complex Supply Chain and Key Technology Decisions
The CPO supply chain spans photonic integrated circuits, laser sources, electronic interface ICs, advanced packaging, optical alignment, and system integration. Foundries such as TSMC play a central role by combining leading-edge logic processes with advanced packaging platforms like CoWoS and COUPE.
Key design decisions analyzed in the report include:
- 2D, 2.5D, and 3D EIC/PIC integration approaches
- External versus integrated laser source architectures
- Edge coupling versus grating coupling for fiber attachment
Most leading implementations favor external laser source architectures, improving thermal reliability and enabling redundancy—critical for hyperscale deployment.
Hyperscalers and the Road to Mass Adoption
Major cloud providers including AWS, Microsoft Azure, Google, and Meta are the primary demand drivers for co-packaged optics. With tens of billions of dollars invested annually in AI data center infrastructure, these organizations are actively evaluating CPO technologies for deployment beginning in 2026–2027.
The competitive landscape blends established semiconductor leaders with innovative startups such as Ayar Labs, Lightmatter, and Celestial AI, each advancing new photonic architectures that could redefine optical interconnect design.
Strategic Insights for Technology and Investment Leaders
Drawing on extensive primary research, the report delivers actionable intelligence on:
- Ten-year market forecasts through 2036
- Product benchmarking of Spectrum-X, Quantum-X, and Bailly platforms
- Foundry and OSAT comparisons
- Startup innovation mapping across the CPO value chain
As AI model complexity accelerates and data center power constraints intensify, co-packaged optics stands out as a cornerstone technology for sustainable, high-performance AI infrastructure.
