CITIC SEC released a research report stating that AI optical interconnect technology is evolving from traditional pluggable modules towards higher density solutions. As a natural extension of pluggable optical modules, XPO provides domestic optical module manufacturers with an optimal pathway to enter the incremental market of AI 10,000-card clusters. As XPO technology undergoes continuous validation and maturation, optical module manufacturers can leverage existing OSFP production lines to swiftly transition to higher-speed modules, fully benefiting from the dual advantages of explosive AI bandwidth growth and the continued pluggable ecosystem. XPO is expected to assist domestic optical module enterprises in initiating a new growth cycle characterized by the resonance of performance and valuation. The main viewpoints of CITIC SEC are as follows.
The explosion in AI computing demand is accelerating a revolution in data center interconnect solutions. OFC 2026 has become a key catalyst node for AI optical interconnect technologies, with three major multi-source agreement organizations—Open CPX, XPO, and OCI—advancing simultaneously. This marks a transition for optical interconnects from "competing technology routes" to a new phase of "multiple tracks progressing in parallel with standards leading the way." Cloud providers' bandwidth demands continue to grow explosively. According to statements from cloud providers at OFC, NVIDIA indicated that AI Agents could expand total computing demand by tenfold, while OpenAI disclosed that inference token volume in 2025 has already grown by 320 times. The arrival of gigawatt-scale AI factories is imminent. This imposes new requirements on data center interconnect solutions—they must simultaneously achieve lower failure rates, lower power consumption, and higher density. Solutions capable of rapid mass production are poised to gain an advantage in this new wave of technological revolution.
XPO achieves comprehensive superiority over traditional OSFP modules. According to the Arista XPO whitepaper, it possesses the following groundbreaking characteristics: 1) Significant leap in bandwidth and density: A single module offers 12.8T bandwidth, equivalent to eight 1.6T OSFP modules, increasing front-panel density by four times. A single rack unit can achieve 204.8T switching capacity, potentially reducing switch racks by 75% and saving 50% of data center floor space. 2) Native liquid cooling for robust thermal control: It pioneers a belly-to-belly dual paddle card design integrated with a cold plate structure, fundamentally overhauling traditional cooling solutions. It supports power consumption exceeding 400W, lowering the operating temperature of components like lasers to 20-25°C, significantly enhancing device lifespan and reliability. 3) Extreme optimization of module design: Electrical channels utilize 64 lanes of 224G, matching the bandwidth of eight MPO-16 connectors, and employ 48V/50V rack busbar power supply. It also supports LPO and FRO schemes, greatly improving signal integrity, power efficiency, and overall power consumption control. 4) Combined maintainability and open ecosystem: It retains full hot-swap capability, is equipped with a lanyard-assisted mechanical ejector, and supports various media including DR/FR/LR/SR/ZR and copper cable/RF, offering cloud providers significant customization flexibility.
The potential for multi-scenario application of XPO ignites a new growth engine for optical modules. In scale-out scenarios, XPO, as a high-density upgrade of pluggable modules, can be flexibly mixed with traditional 1.6T/3.2T modules based on rack space, total cost of ownership, and cooling conditions, enabling on-demand deployment. According to Arista's statements at OFC, XPO is expected to extend the lifecycle of pluggable solutions until at least 2028. In scale-up scenarios, XPO, with its 12.8T high bandwidth, native liquid cooling, and full hot-swap capabilities, avoids the maintainability challenges associated with CPO, while boasting higher supply chain maturity and a more open ecosystem. It is likely to be adopted by cloud providers for entry into the scale-up market, which has even larger incremental bandwidth demands. TeraHop demonstrated an XPO-based interconnect solution for scale-up at OFC. Furthermore, XPO also shows potential for penetration into scale-across medium and long-distance interconnect scenarios.
Chinese optical module manufacturers are actively participating in the XPO ecosystem build-out. Based on Arista's OFC presentation materials, several Chinese companies have joined as founding members of the XPO MSA and showcased 12.8T XPO products at OFC 2026. Chinese optical module manufacturers have become rule-makers for the new generation XPO standard and are actively driving the research, development, testing, and deployment of XPO products, positioning themselves to harness new growth momentum.
Risk factors include slower-than-expected AI development; lower-than-expected capital expenditure by cloud providers; delays in the commercial progress of XPO; risks associated with technology path substitution; and geopolitical risks.
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