AI infrastructure spending shifts high-end router demand toward data centers

Market forecast raised as AI capacity expands

Global investment in artificial intelligence infrastructure is changing the market for high-end routers and aggregation switches. Demand is moving away from its traditional dependence on telecommunications networks and toward the high-capacity connections required by data centers, cloud platforms and AI computing clusters.

Dell’Oro Group expects the market for high-end routers and aggregation switches to reach $19 billion by 2030, according to Cretalive. The research company raised its five-year forecast as operators of computing infrastructure seek greater network capacity, stronger links to cloud services and more connections between large data centers.

The revised outlook indicates that data center connectivity will exert a growing influence on router demand over the next five years, while spending on conventional telecom infrastructure will become relatively less important. This changes the customer mix for equipment suppliers and shifts product development toward the performance requirements of cloud and AI workloads.

Core and edge equipment benefit from data traffic

The largest forecast revision concerns core routers. These systems are a critical part of data center interconnect, or DCI, infrastructure, which carries traffic between large facilities supporting AI applications. Expanding computing capacity across multiple sites raises the need to transfer large volumes of data reliably and at high speed.

Dell’Oro also increased its expectations for edge routers. Wider use of AI applications is increasing data-transfer requirements and user access to computing infrastructure. This creates demand beyond the internal networks of individual data centers, extending to the points where users, cloud services and distributed computing resources connect.

Cloud providers are expected to be the strongest source of growth. Their spending on high-end routers is forecast to rise at a compound annual growth rate of 16% through 2030. North America is leading the expansion because it hosts the largest hyperscalers and the overwhelming majority of new data center development projects, although Dell’Oro sees AI-related router demand increasing in nearly every geographic region.

Telecom demand pauses before prospective 6G cycle

The outlook is weaker for equipment tied to mobile network expansion. Revenue from edge routers and aggregation switches used in mobile backhaul is expected to remain broadly flat over the next four years as 5G deployment enters a mature phase. That removes a growth engine which shaped networking investment during the previous decade.

Dell’Oro expects the telecom picture to change toward the end of the decade, when investment in 6G networks is due to begin. Electronic communications providers would then need further network upgrades and new radio equipment to deliver higher speeds and more advanced digital services. Until that cycle develops, however, data center construction and AI infrastructure are set to determine a larger share of high-end routing demand.

For network equipment manufacturers, the shift increases the commercial importance of hyperscalers, cloud providers and data center operators. Suppliers will compete increasingly around core routing capacity, DCI and the ability to handle rapidly expanding AI traffic. Telecom operators will remain an important customer group, but their near-term purchasing cycle is unlikely to match the pace of cloud infrastructure spending.