Citi Raises 2026 AI Capex Forecast to $730.9B, Points to Optical Networking as Next Stage Winner

According to Citigroup's latest research report, the five major cloud hyperscalers' combined data center capital expenditure forecasts have been significantly raised for 2026 to $730.9 billion, up 16% from April estimates, reflecting sustained demand surpassing earlier market expectations. The investment trajectory now spans $400.2 billion in 2025 to $970.1 billion in 2027 and $1.16 trillion by 2028, marking the entry into the trillion-dollar era of AI infrastructure spending.

Citigroup's analyst Ronald Josey team identified AI networking as entering "Stage 4"—the early adoption phase of near-packet optics (NPO) and co-packaged optics (CPO) technologies replacing earlier bandwidth expansion stages. The firm highlighted Lumentum, Ciena, and Keysight Technologies as primary beneficiaries, with Lumentum positioned as a key winner in NPO and CPO optical interconnect leadership, while Ciena gained over 300 basis points in optical transmission market share in Q1.