Co-Packaged Optics Market: AI Workload Growth, Energy-Efficient Interconnects & Data Center Advancements

According to IMARC Group's latest research publication, global co-packaged optics market size reached USD 84.43 Million in 2024. Looking forward, IMARC Group expects the market to reach USD 3,095.40 Million by 2033, exhibiting a growth rate (CAGR) of 48.69% during 2025-2033.

How AI is Reshaping the Future of Co-Packaged Optics Market

• AI-Driven Network Optimization: Machine learning algorithms analyze data center traffic patterns to optimize optical interconnect configurations, predicting bandwidth bottlenecks and dynamically adjusting network topologies for maximum efficiency in real-time operations.
• Intelligent Thermal Management Systems: AI models monitor temperature distributions across co-packaged optical engines, predicting heat-related failures before they occur and automatically adjusting cooling systems to maintain optimal performance in high-density AI clusters.
• Automated Design and Manufacturing: Advanced AI tools accelerate photonic chip design by simulating thousands of configurations, optimizing waveguide layouts, and detecting manufacturing defects during production, reducing development cycles from months to weeks.
• Predictive Maintenance and Reliability: AI systems track optical signal quality and component degradation patterns across millions of link hours, enabling proactive replacements and ensuring continuous uptime for critical data center operations without service disruptions.

Smart Power Consumption Analytics: Machine learning platforms analyze energy usage across optical and electrical pathways, identifying optimization opportunities that reduce power consumption per bit transferred, helping data centers achieve sustainability targets while maintaining performance.

Request a Sample Report with the Latest Data & Forecasts

Co-Packaged Optics Industry Overview:

The explosive growth of AI workloads is fundamentally transforming data center architectures, with co-packaged optics emerging as the critical solution for next-generation connectivity. As of December 2024, the United States operates 1,692 active data centers with 332 under construction, reflecting massive infrastructure expansion to support cloud computing, streaming services, and IoT applications. Energy efficiency has become paramount as data center electricity consumption is projected to reach 6% of total U.S. consumption by 2026, equivalent to 43 nuclear reactors. Co-packaged optics addresses this challenge by integrating optical components directly with semiconductor chips, dramatically reducing power requirements compared to traditional pluggable transceivers while enabling terabit-scale data transmission essential for scaling AI factories to millions of connected GPUs.

Co-Packaged Optics Market Trends & Drivers

• The rapid deployment of 5G networks and AI infrastructure is driving unprecedented demand for high-bandwidth optical interconnects. In the United States, 5G connections reached 68.4 connections per 100 inhabitants, with 40% of cellular connections utilizing 5G technology by end of 2023. Cloud service providers invested a record $227 billion in capital expenditures in 2024, marking a 39% increase from 2023, with substantial portions directed toward advanced data center infrastructure. Nvidia's unveiling of Quantum-X and Spectrum-X silicon photonics switches at GTC 2025 represents a watershed moment, featuring 1.6 Tbps ports using co-packaged optics to connect GPUs with significantly improved electrical efficiency. These switches eliminate traditional pluggable transceivers that would require 6 million units consuming 180 megawatts for a million-GPU installation, instead saving tens of megawatts through integrated silicon photonics. The technology enables AI factories to scale beyond current limitations, with Broadcom's third-generation 200G per lane CPO solutions and Marvell's custom XPU architectures demonstrating commercial viability.
• Technological breakthroughs in silicon photonics manufacturing are accelerating market adoption across hyperscale data centers. In December 2024, IBM unveiled a breakthrough polymer optical waveguide prototype enabling six times higher beachfront density compared to current CPO technology, with each fiber transmitting terabits per second while passing rigorous stress tests from -40°C to 125°C. TSMC's A14 logic process technology, announced in August 2025, offers 15% faster speeds or 30% power reduction with production beginning in 2028. Broadcom reported that Meta tested its CPO solutions for one million link hours without a single link flap in high-temperature environments, demonstrating exceptional reliability critical for production deployments. Ayar Labs and Alchip Technologies formed strategic partnerships in September 2025 to accelerate AI scale-up infrastructure using TSMC's COUPE and SoIC advanced packaging technologies. GlobalFoundries and Corning announced collaboration on detachable fiber connector solutions using glass-waveguide technology, addressing key assembly and serviceability challenges that have historically limited CPO commercialization.
• Growing edge computing requirements and semiconductor industry investments are creating new market opportunities. Over 5,000 data centers operate across the United States according to the National Telecommunications and Information Administration, with top technology giants like Google, Amazon, and Microsoft driving approximately 70% of demand for next-generation optical interconnects. The U.S. imported over $1.2 billion of optical components in 2024, up 22% from the previous year, reflecting surging bandwidth needs. India's semiconductor sector reached $26.3 billion valuation in 2022, while the country's top seven cities now have combined data center capacity of 977 MW, demonstrating rapid infrastructure expansion in emerging markets. Monthly global mobile network data traffic reached approximately 180 exabytes in 2025, rising 19% year-over-year driven by video streaming and 5G adoption. The establishment of America's first National Semiconductor Technology Center NSTC EUV Accelerator in Albany, New York, where IBM completed CPO design work, signals strong government support for domestic photonics manufacturing capabilities essential for maintaining technological leadership.

Leading Companies Operating in the Global Co-Packaged Optics Industry:

• Broadcom Inc.
• Lumentum Operations LLC
• Ranovus

Co-Packaged Optics Market Report Segmentation:

By Data Rates:

• Less than 1.6T and 1.6T
• 3.2T
• 6.4T

Less than 1.6T and 1.6T techniques represent the largest class, as they enable compact integration in data centers while optimizing electrical and optical connections.

By Application:

• Data Centers and High-Performance Computing (HPC)
• Telecommunications and Networking
• Others

Data Centers and High-Performance Computing have the largest market share owing to the massive bandwidth requirements for AI training and inference workloads.

Regional Insights:

• North America (United States, Canada)
• Asia Pacific (China, Japan, India, South Korea, Australia, Indonesia, Others)
• Europe (Germany, France, United Kingdom, Italy, Spain, Russia, Others)
• Latin America (Brazil, Mexico, Others)
• Middle East and Africa

North America exhibits a clear dominance in the co-packaged optics market due to the presence of leading technology companies and advanced AI infrastructure.

Recent News and Developments in Co-Packaged Optics Market

• January 2025: Marvell Technology announced the launch of a new AI accelerator integrated with co-packaged optics technology to enhance server performance. The architecture allows for AI server scalability, improves data transfer rates, and reduces power usage.
• June 2024: Samsung showcased its advanced semiconductor innovations at the Samsung Foundry Forum (SFF) in San Jose, unveiling cutting-edge 2nm (SF2Z) and 4nm (SF4U) process nodes. The event highlighted Samsung's commitment to AI-era solutions and introduced plans for future CPO-integrated AI offerings.
• June 2024: Intel demonstrated the world's first fully integrated optical compute interconnect (OCI) chiplet, co-packaged with an Intel CPU, at the Optical Fiber Communication Conference (OFC). This co-packaged OCI chiplet enabled high-bandwidth optical I/O, reducing power usage and increasing reach, which is crucial for scaling AI workloads and high-performance computing.
• March 2024: MediaTek ventured into the rapidly growing field of Heterogeneous Integration Co-Packaged Optics (CPO) through a strategic partnership with optical communications firm Ranovus. Together, they introduced a customized Application-Specific Integrated Circuit (ASIC) design platform tailored for CPO applications.
• March 2024: Broadcom launched Bailly, the world's first 51.2 Terabits per second (Tbps) co-packaged optics (CPO) Ethernet switch. This innovative product combined advanced silicon photonics technology with Broadcom's industry-leading StrataXGS Tomahawk 5 switch chip, establishing a new benchmark for efficiency and performance in AI infrastructure.

Note: If you require specific details, data, or insights that are not currently included in the scope of this report, we are happy to accommodate your request. As part of our customization service, we will gather and provide the additional information you need, tailored to your specific requirements. Please let us know your exact needs, and we will ensure the report is updated accordingly to meet your expectations.