In 2025, substantial investments by hyperscalers in AI infrastructure propelled shipments of 800G PAM4 chipsets to nearly triple, with sales revenue more than doubling year-over-year. These investments continue to escalate in 2026, leading to revised upward forecasts for both 800G and 1.6T optical transceiver shipments. Industry projections now indicate that 800G shipments will more than double in 2026, while 1.6T ports will surge from a modest base in 2025 to tens of millions. Sales of 1.6T chipsets are expected to surpass $2 billion in 2026 and maintain rapid growth through 2029.
Historically, Ethernet and DWDM technologies have dominated the chipset market. However, in 2025, the data center segment emerged as a key growth driver for chipsets used in active cables (AOC/AEC/ACC) and on-board retimers. Over the forecast period, fully retimed Ethernet transceivers are anticipated to contribute the largest dollar growth, followed by active cables and linear optical solutions (LPO/LRO/CPO).
While PAM4 chip sales skyrocketed in 2025, coherent DSP chipsets experienced a more modest 16% growth, driven by demand for DWDM modules. The sales gap between PAM4 and coherent chipsets is projected to widen further in 2026, primarily due to the accelerating adoption of 1.6T PAM4 optics for AI infrastructure. From 2027 to 2031, growth in PAM4 chipset sales is expected to moderate as volume deployments of linear-drive solutions (LPO and CPO) begin to impact DSP demand. By 2027, shipments of Coherent-Lite solutions are forecast to significantly boost coherent DSP sales, with total coherent DSP units exceeding 8 million by 2031.
The emergence of AI training workloads spanning multiple facilities within a data center campus could drive additional demand, as these applications require greater inter-building bandwidth. Historical chipset sales data is derived from LightCounting’s two-decade-long tracking of optical transceivers and AOCs. The chipset forecast is similarly based on projections for optical transceivers and active cables, offering a clear correlation between chipset demand and optical connectivity deployments across diverse applications. However, this methodology does not account for inventory fluctuations at different supply chain stages that may cause discrepancies between chipset and transceiver demand.
As AI capital expenditures flow down the supply chain, DSP vendors stand to benefit significantly. LightCounting has released its latest report on PAM4 and Coherent DSPs, providing comprehensive insights into these trends.
