AI data center interconnect will bolster optical transport, finds Dell’oro
In sum, what to know:
Optical transport bounce-back – 2024 was a tough year for optical transport, but AI data center interconnect will bolster this sector by 5% annually.
“Explosive scale” in AI back-end networks – Data center front-end networks will see a compound annual growth rate of more than 40% through 2029.
Interconnection of AI data centers is expected to drive growth in the optical transport market over the next five years, according to a new forecast from Dell’Oro Group.
The optical transport market had dropped 9% during 2024, while the rest of the telecom industry experiencing a slow-down as well. Now, however, the optical transport market is expected to see solid growth of 5% annually for the next five years, hitting $19 billion as of 2029.
What’s driving the return to growth? AI data center interconnect (DCI).
“We are anticipating that the time has come to interconnect all those new AI data centers being built,” said Jimmy Yu, VP at Dell’Oro Group. “We are forecasting data center interconnect to grow at twice the rate of the overall market, driven by increased spending from cloud providers.” He added that the direct purchases of equipment for DCI include optics for IP over DWDM, optical line systems for transport, and DWDM systems for high-performance, long-distance terrestrial and subsea transmission.
Separately, the analyst firm recently found that the “explosive scale” happening in AI back-end networks is driving the need for additional capacity in data center switch front-end networks. Data center front-end networks will see a compound annual growth rate of more than 40% through 2029, Dell’Oro concluded.
Sameh Boujelbene, VP at Dell’Oro Group, said that “AI back-end deployments are … breathing new life into this market.”
The firm indicated that while there have been some deployment delays to this point, there will be nearly 90 million 800 Gbps and 1.6 Tbps switch ports integrated into front-end networks in the next five years — and shipments for back-end networks are expected to be more than triple that.
Boujelbene continued: “What’s often overlooked is that within front-end networks, there’s now a growing need for a new segment of connectivity — linking accelerated servers not to each other, but to the front-end network for data ingest. This additional capacity will require high-speed connectivity and command a price premium.”
