Goldman Says AI Networking Is a $154 Billion Market by 2028

Goldman Sachs gave photonics a $154 Billion TAM by 2028

Last week, we covered a research firm’s call that put optical interconnects at $144 billion by 2030. It looked aggressive. Goldman Sachs just topped it. In an April global tech report, the bank sized AI networking at roughly $154 billion for the Rubin Ultra product cycle. Most of that lands in 2028. Its math on the current GB300 cycle? About $15 billion. That’s a 9x jump in two product generations. And this isn’t a blog post. It’s the biggest name on Wall Street putting a hard number on the photonics buildout.

Scale Up Is the New Money

The money splits across two builds. Scale out is the one everyone knows. More racks, more switches, all stitched together with optics. Scale up is the newer game: making a group of racks behave like one giant machine. Nvidia $NVDA built Rubin Ultra to run 576 GPUs as one unit across eight racks. Wiring that takes copper, fiber, and co-packaged optics all at once. That’s why Nvidia’s own silicon photonics switchesexist. Goldman figures the networking content per computing unit grows about 29x from GB300 to Rubin Ultra. Speed does the rest of the work. 800G modules hand off to 1.6T this year. 3.2T is next in line.

Optical Engines Take the Biggest Slice

Here’s the detail we care about most. Goldman tore down a co-packaged optics switch and priced every part. Optical engines came in at 43% of the bill of materials. Nothing else was close. Stretch that across the full Rubin Ultra scenario and engines plus their fiber attach units add up to roughly $56 billion. External light sources add another $10 billion or so. All told, the bank puts co-packaged optics at $91 billion of the $154 billion pie. The engine is the value. Most of the rest is packaging.

The Bear Case on Modules Just Got Weaker

Every optical module investor knows the pitch. Co-packaged optics arrives, pluggable modules die. Goldman ran the numbers with CPO taking 29% of scale-out connections. Pluggable value still grew 10x per computing unit. Module counts climbed from 216 to roughly 2,500 in 1.6T terms. The report lands on co-existence, not replacement. Better still, the module makers pick up new product lines along the way: optical engines, fiber attach units, and light source modules. The pie grows faster than any slice shrinks.

Silicon Photonics Takes Over the Module

Inside the module, the chip itself is changing. Goldman sees silicon photonics rising from 6% of the datacom market in early 2024 to about 46% by late 2028. Cost is the reason. At 1.6T speeds, a silicon photonics module carries a 32% bill-of-materials edge over the older EML design. Fewer lasers, more integration. The bank expects module makers’ gross margins to climb toward 48% to 55% as that mix shifts.

As we have said on StockAlpha.ai Light Is the Choke Point

None of this works without lasers, and lasers are scarce. Goldman expects laser supply to stay tight through 2027, pinched by shortages of the InP substrates they’re built on. The public names already show it. Lumentum $LITE told investors in February that its optical circuit switch backlog had passed $400 million. It also booked a co-packaged optics order worth hundreds of millions, set for 2027 delivery. Coherent $COHR has engaged more than ten OCS customers and has committed to doubling capacity. Broadcom $AVGO shipped its 102.4T CPO switch to customers last fall. Tight supply into a 9x demand curve is pricing power, plain and simple.

The Component Makers Are the Market

Now for the part that interests us. Goldman sized this market by component, not by brand. Engines. Light sources. Fiber attach. Somebody has to build those parts, and most of the companies that do are small. POET Technologies $POET builds exactly this. Its optical interposer platform produces optical engines at 800G and 1.6T, with 3.2T on the roadmap. It’s building external light sources aimed at the CPO era too. The order book says the approach is working. POET holds a $50 million initial purchase order from Lumilens, under a framework worth up to $500 million over five years. It has posted six straight quarters of sequential revenue growth, with Q2 revenue up 112% from a year ago. It closed the quarter with $796.3 million in cash and short-term investments. A September business update is on the calendar. Its Blazar light engine is also up for an award at ECOC 2026 on September 21. Goldman didn’t name the small caps. The line items did it for them.