Citi Backs CPO: The market for four core components is expected to experience an exponential surge in 2027-2028

Citigroup believes that as AI infrastructure scales up rapidly, the four core component markets in the CPO sector—FAU/connectors, ELSFP (external laser sources), fiber interconnect modules, and fiber trays—will experience a significant leap by 2027, with the combined market size potentially surpassing 185 billion RMB in 2028.

According to Citi’s latest estimates, by 2028, the CPO-driven FAU/connectors market will reach approximately 10.5 billion RMB, ELSFP about 29.6 billion RMB, fiber interconnect modules around 89.6 billion RMB, and fiber trays approximately 55.7 billion RMB.

2027 will be a critical breakout year—FAU/connectors are expected to grow over 3400% year-over-year, ELSFP over 2600%, fiber trays over 3200%, and fiber interconnect modules will see growth by several tens of thousands of times. In 2028, these four markets are projected to further double or more on top of their already high 2027 bases.

This growth outlook is based on phased implementation of NVIDIA’s CPO roadmap. Combining information from the 2026 GTC and OFC conferences, Citi judges that Kyber will be the first to launch with Vera Rubin Ultra, with Rubin series CPO deployment transitioning via a hybrid approach, and Feynman Kyber 1152 achieving full CPO integration.

Switch Demand: From 5,000 units in less than three years to nearly 700,000 units

Citi maintains its demand forecasts for CPO switches at 300 units in 2025, 5,000 in 2026, and 209,000 in 2027. The external expansion (scale-out) needs are projected at 300, 5,000, and 40,000 units respectively; from 2027 onward, additional scale-up (upgrading existing racks) demand will add about 169,000 units.

For 2028, Citi introduces a new demand assumption of approximately 691,000 CPO switches—about 100,000 for scale-out and an equivalent of 591,000 units for scale-up, based on roughly 7 million Rubin Ultra GPU chips or about 48,600 NVL576 racks (assuming 60% deployment rate). Compared to 2026’s 5,000 units, this implies nearly 140-fold growth within three years.

Regarding specifications, Citi updates its reference model for 2026–2028 from the previous Spectrum SN6800 to SN6810, adjusting each switch’s optical engines to 32 and ELSFP modules to 16. Citi believes SN6810 is better suited for medium-scale AI cluster deployments.

Four Major Component TAMs: Focused Differently, Fiber Interconnect Modules Largest

FAU/Connectors: Citi forecasts the CPO-driven market will jump from about 110 million RMB in 2026 to roughly 3.94 billion RMB in 2027, and further to about 10.5 billion RMB in 2028, driven by both scale-out and scale-up network demands.

ELSFP: The market size is expected to grow from about 41 million RMB in 2026 to 11.2 billion RMB in 2027, and approximately 29.6 billion RMB in 2028, with over 2600% YoY growth in 2027.

Fiber Interconnect Modules (Fiber Shuffle): The largest TAM among the four components. Citi projects a market size of about 34.3 billion RMB in 2027 and around 89.6 billion RMB in 2028. The growth is mainly driven by the large-scale deployment of Rubin Ultra racks, with inter-rack scale-up interconnects, accounting for nearly half of the total component market by 2028.

Fiber Trays: Citi estimates the market will reach about 24 billion RMB in 2027 and approximately 55.7 billion RMB in 2028, mainly driven by NVL576 rack deployments, with YoY growth exceeding 3200% in 2027.

Overall, from 2027 to 2028, the core demand shift is from scale-out networks to scale-up networks, with the latter’s component needs far surpassing the former. This structural change is the fundamental reason for the market size leap in 2027.

CPO Migration Roadmap: Three-Stage Framework and Supply Chain Bottlenecks

Citi outlines a three-stage CPO migration framework:

Stage 0: Scale-out network CPO adoption, expected to start with Spectrum CPO in late 2026;

Stage 1: Rack-to-rack scale-up, tied to Rubin/Rubin Ultra product cycles;

Stage 2: Intra-rack deep scale-up, achieved with Feynman architecture enabling full CPO integration.

Citi believes this phased approach aligns with previous market understanding of supply chain readiness. Ayar Labs notes that the current hybrid copper interconnect plus CPO solutions are due to incomplete supply chain readiness for full CPO deployment, providing cross-validation for Citi’s incremental assumptions.

Lumentum’s capacity expansion plans and the 85% annual growth rate of indium phosphide optical channels depict a tight supply-demand scenario: supply constraints are unlikely to ease in the short term, which could limit large-scale CPO deployment but also support component pricing.

Main Risks: Deployment Delays and External Variables

Market opinions on CPO deployment pace vary. Citi notes that Asian investors generally consider the 209,000 units forecast for 2027 reasonable (market expectations are 250,000–350,000 units), while US investors view this as somewhat aggressive (market expectations above 100,000 units).

Citi admits that TAM estimates for CPO components carry uncertainties, and some market size assumptions may be optimistic.

Key downside risks include whether global AI demand can sustain current infrastructure investments; whether technical maturity and supply chain integration challenges delay deployment; and whether upstream optical chip supply constraints can be effectively resolved at critical points.

External factors such as potential supply chain shocks and evolving competitive dynamics within the CPO ecosystem are also risks investors should consider.

Citi’s estimates suggest that if NVIDIA’s CPO roadmap proceeds as planned, 2027–2028 will be a critical window for demand release of the four core components. However, actual progress remains a key variable determining whether market sizes can be realized as expected.

Risk Disclaimer and Caution

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