Global AI data center switch market projected to reach $19.38b by 2029

The global AI data center switch market was valued at US$2.78 billion in 2023, and is expected to be worth US$19.38 billion in 2029, registering CAGR of 38.23% over the years 2024-2029, according to Research and Markets.

In the rapidly evolving landscape of AI data center switches, several trends are poised to shape the market. One significant trend is the increasing demand for AI-driven automation and optimization capabilities to manage the growing complexity of data center networks efficiently. AI-powered switches are expected to offer more advanced features such as predictive analytics, self-learning algorithms, and automated network optimization, enabling data center operators to streamline operations and improve performance.

Moreover, there’s a rising focus on enhancing network bandwidth and speed to support the burgeoning data traffic generated by emerging technologies like 5G, IoT, and AI applications. Ethernet switches with bandwidths of 600+ gigabits per second (Gbps) are gaining traction as they provide the necessary throughput to handle large volumes of data with low latency, facilitating smooth and reliable data center operations.

Market Segmentation Analysis:
By Type: Over time InfiniBand switches have enjoyed widespread adoption due to their swift and effective communication pathways between AI data center switches and storage systems. However, the Ethernet switches are gaining significant traction in the AI data center networking market and are expected to become the dominant technology. Cloud service providers are increasingly considering Ethernet, particularly RDMA over Converged Ethernet (RoCE), as a substitute for InfiniBand due to factors like economies of scale, a broader supplier base, and interoperability. InfiniBand and Ethernet are both expected to be utilized in the back-end, with the choice influenced by customer and vendor preferences. The ongoing debate between InfiniBand and Ethernet for AI deployments is expected to persist, with valid arguments on both sides such as performance versus economies of scale. However, it’s noteworthy that the deployment of high-bandwidth Ethernet data center switches is projected to grow at a double-digit rate regardless of AI deployments.

By Enterprise Size: Large enterprises accounted for the highest share in the AI data center switch segment. Large enterprises typically comprise established organizations with extensive infrastructure requirements and complex networking needs. They often operate multiple data centers or large-scale cloud environments to support their operations. Factors driving the growth of AI data center switches in large enterprises include the need for high-performance, scalable, and resilient network infrastructure to handle massive data volumes, diverse workloads, and demanding applications. Simultaneously, small & medium enterprises segment is anticipated to exhibit the fastest CAGR during the forecasted period.

By Region: North America remains a powerhouse in the global AI data center switch market, driven by a mature technology landscape, substantial investments, and a concentration of leading tech companies. The US, with Silicon Valley at its core, is a major influencer in AI data center switch development and adoption. The competitive nature of industries in North America, especially in areas like e-commerce, social media, and autonomous vehicles, intensifies the need for cutting-edge AI infrastructure. The synergy of 5G, IIoT, and advanced technologies within the expansive cloud ecosystem in the region not only signifies a technological evolution but also underscores the pivotal role of cloud services in shaping the future landscape of the AI data center switch market in the country.

Asia pacific region is expected to grow at the fastest CAGR during the forecasted period. The demand and adoption of the cloud in the Asia Pacific are forecasted to exceed the rest of the world, as the effects of COVID-19 linger and businesses look to lay a foundation for increased agility and resilience. There is a steady increase in the percentage of IT spending that is devoted to the cloud. The AI data center switch market would witness rapid growth in the forecasted period, spurred by a rise in cloud computing usage by companies. The Asia Pacific (APAC) region stands out as a significant driver of the global AI data center switch market, characterized by a dynamic and rapidly expanding tech landscape. China, with its ambitious AI development plans, is a major contributor to the growth, leveraging AI data center switches in applications ranging from smart manufacturing to facial recognition systems. The country’s focus on becoming a global AI leader is reflected in the substantial investments in AI research and development. The Chinese government has launched a three-year plan for the data center industry that requires new facilities to have a PUE (power usage effectiveness) of 1.3 and a utilization rate of 60% by the end of 2023. In addition, nations throughout the region are deploying ARM-based services. These factors generate demand for AI data center switches, likely stimulating market expansion. Research and Markets