Morgan Stanley raises AI optical transceiver outlook as cloud capex drives supply squeeze

Morgan Stanley sharply raised its 2026-2028 AI optical transceiver shipment forecasts in a May 14, 2026, report, citing faster-than-expected demand from hyperscale data centers and extended capacity constraints across the supply chain. The bank lifted its 2027 forecast for 1.6T transceivers to 79 million units from 24 million, a 233% increase. It expects capital spending by the top 11 global cloud providers to reach $735 billion to $795 billion in 2026, up about 60% from 2025, as Amazon, Google, Meta and others expand AI infrastructure. Morgan Stanley estimates the global AI optical transceiver market will grow to $102 billion in 2028 from $18 billion in 2025. Morgan Stanley said shortages in lasers, memory and ASICs remain key bottlenecks but are accelerating adoption of silicon photonics, which it expects to overtake traditional technology in 2026. The bank said co-packaged optics are unlikely to materially disrupt pluggable modules until 2028 or later, leaving a two- to three-year window for incumbent suppliers.