How Co-Packaged Optics (CPO) Are Solving the Critical Performance and Power Challenges of Next-Generation AI Data Center Networks
Analyst(s): Tom Hollingsworth
Publication Date: February 13, 2026
AI networking continues to require more bandwidth to meet the demand of data. Traditional optical interconnects reduce performance and consume significant power. Co-packaged optics (CPO) solve these issues in current networking hardware while laying the groundwork for new advances in optical technology.
Key Points:
- AI workloads are driving exponential bandwidth demand, outpacing current pluggable optics’ capabilities.
- CPO promise significant reductions in power consumption and heat while enabling faster data rates.
- Networking vendors must embrace CPO to keep pace with the evolving requirements of AI infrastructure.
Overview:
AI has increased the amount of bandwidth needed for a wide variety of operations. Manufacturers are releasing new switching hardware that provides high-speed interconnect between AI clusters. Optical networking is required for these connections. The complexity of optical connectors has led to reduced performance as well as higher costs for cooling and power usage. CPO solve these issues by increasing performance and reducing environmental concerns.
Ethernet for AI Networking: Modern AI data centers are adopting Ethernet for the transport layer over Infiniband. NVIDIA Spectrum-X, Cisco AI Networking, and Broadcom Ethernet for AI Networking all show the industry shift toward time-tested technology and reduced management overhead.
Optical Module Complexity Issues: Optical networking connectors are necessary to convert light pulses into electrical signals for networking hardware. Current optical modules must use advanced technology to reduce signal loss during data transmission. Digital Signal Processors (DSPs) are critical to the performance of the current generation of modules, but increase cost and energy consumption while increasing waste heat generation.
Co-Packaged Optic Opportunity: CPO provide a path to increase performance with modern Ethernet switch designs. Placing the optical translation layer directly on the networking hardware substrate, next to the ASIC, increases performance while simultaneously reducing path loss, power consumption, and overall unit cost.
Conclusion
CPO are a requirement for networking hardware that will be used in high-performance AI data center applications. Every connection that transitions away from the traditional architecture will add up to significant cost savings and better performance for AI applications that require peak performance at all times.
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