This year will also mark a turning point in the unprecedented growth of US cloud companies, which have benefited enormously from the global free trade of goods and services. The new world order will be different. Antitrust regulations in the US and Europe pose another challenge. Emerging domestic or regional cloud companies are likely to grow faster than their US-based competitors.

The following figure illustrates this transition by analyzing sales of Ethernet and DWDM transceivers to the five largest US-based cloud companies: Amazon, Google, Meta, Microsoft, and Oracle. After more than a decade of steady growth, a gradual decline in the market share of optical products consumed by these companies will follow. Their spending on transceivers will continue to grow, but not as rapidly as the rest of the global market.

Ethernet transceiver sales increased by 90% in 2024, but we have reduced our 2025 growth forecast from the 40% projected before the "release day" (April 2, 2025) to just 20%. Most of this growth will come from transceiver sales to Chinese cloud companies, which will also boost AOC's sales in 2025. Alibaba, ByteDance, Huawei, and other Chinese companies are doubling their spending on optics this year and are well-positioned to mitigate US tariffs, using alternative sources if necessary. Chinese companies, led by Huawei, have been actively decoupling from their reliance on US technology for nearly a decade, and these efforts will now pay off.

A broader recovery in the global telecom market, coupled with continued investment in DCI networks, will propel the DWDM, FTTx, and wireless fronthaul transceiver markets into positive territory by 2025-2030. However, we have lowered our DWDM transceiver sales forecasts for the top five US-based cloud companies.

The global race for AI marks the beginning of the digital transformation of many sectors and the proliferation of cloud-based services, such as training and inference for video-based AI models. Optical networks and the global telecommunications sector will be integral to the future of AI, opening up new opportunities for telecom service providers and their suppliers. Google's recent announcement that it will begin offering WAN services to businesses may trigger even greater competition.

Source: Lightcounting