Co-packaged Optics market projected to reach $2.887 billion by 2035

The Co-packaged Optics (CPO) market is projected to grow from $131.4 million in 2025 to $2.887 billion by 2035, representing a compound annual growth rate (CAGR) of 36.2%. This expansion is driven by the increasing data demands of generative AI, machine learning, and high-performance computing (HPC) within hyperscale data centers.

CPO technology addresses the limitations of traditional plug-in optical modules by placing optical engines in close proximity to electronic circuits, such as switching ASICs, within the same package. This architecture reduces electrical signal transmission distances, providing higher bandwidth density, lower latency, and improved power efficiency. NVIDIA has already begun deploying CPO-based network switches, such as the Spectrum-X Photonics, to support AI factories.

In terms of manufacturing, the 2.5D CPO segment is expected to lead in revenue through 2025. This method offers a balance between high performance and manufacturability by integrating optical engines and ASICs on an interposer, which simplifies thermal management and assembly compared to 3D stacking methods.