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Deutsche Bank expects the revenue compound annual growth rate (CAGR) of AI datacenter network switches to reach 55% between 2023 and 2026.
The demand for network hardware iteration is continuously increasing for the hot topic of AI datacenter. Among them, the explosive increase of data flow caused by large model training has promoted the demand and specification upgrade of network switches.
According to the report released by Sharon Shih and Charlie Chan of Morgan Stanley on June 24, using network switches upgraded to 800Gbps port specification will become the main driving force of AI technology.
Datacenter switch is a core network equipment that connects various devices in a datacenter, including servers, storage devices, and network devices, and is an indispensable part of datacenter network architecture. Ethernet switch is one of the most common forms of network switches.
AI datacenter network switch market: Two-digit compound growth within three years.
For AI datacenters, the rapid increase in data volume brings the most intuitive demand for switches: stronger processing capabilities and higher throughput.
The report indicates that with the construction and upgrading boom of AI datacenters, the network switch market will usher in a thriving development. It is expected that the CAGR of AI datacenter network switch revenue will reach 55% from 2023 to 2026, while that of datacenter network switches will be 11%, and the CAGR of the entire network switch market will be 4%.
In terms of specifications, the report predicts that network switches will accelerate the migration to the 800Gbps port specification starting from 2025. By 2026, 800Gbps will account for 28% of the revenue of datacenter Ethernet switches, far exceeding this year's 5%.
As for individual stocks, Morgan Stanley is bullish on Accton, which has a leading position in the network switch field.$Arista Networks (ANET.US)$ and $Cisco (CSCO.US)$Leading position in the field of network switches.
Ethernet switches "recapture lost ground."
Previously, due to its low latency, InfiniBand has always been$NVIDIA (NVDA.US)$Infiniband has always been the preferred technology for the ecosystem due to its low latency, so its share in the AI datacenter switch market continues to expand.
However, the report predicts that Ethernet will regain its share.
The report indicates that as large-scale enterprises choose more open ecosystems to reduce potential supply chain risks, the application of GPU and ASIC chips outside of NVIDIA will be more diversified in different tasks, and Ethernet may be the preferred choice for these tasks.
Morgan Stanley expects that Ethernet's revenue share in AI datacenters will expand from 38% in 2023 to 49% in 2026.
Editor/tolk