The data center industry witnessed a remarkable growth spurt in Q3, fueled by a surge in sales of components such as servers, storage devices, and Ethernet switches. According to a recent report from Dell’Oro Group, the boost in demand was primarily attributed to the flourishing AI sector, with hyperscale data centers playing a pivotal role in propelling the growth of data center infrastructure. The research highlighted a substantial increase in sales, driven predominantly by the escalating demand for AI-related technologies.
The report shed light on the impact of the high demand coupled with limited supply, with major players like Nvidia, Samsung, and SK Hynix reaping the benefits in semiconductor earnings. The coveted GPUs, CPUs, FPGAs, and custom AI ASICs witnessed a significant uptick in sales, alongside Ethernet adapters and storage components like HDDs and NAND/SDDs. The quarter’s growth was spearheaded by Nvidia’s Blackwell Ultra ramp, with deployments of custom accelerators from hyperscale customers experiencing a surge.
While AI played a pivotal role in driving growth during the quarter, there was also a notable spike in demand for general-purpose infrastructure, leading to increased sales of CPUs, NICs, and storage drives. Looking ahead, Dell’Oro projects a robust 26% compound annual growth rate for server and storage system components over the next five years, surpassing a staggering $760 billion.
The surge in Ethernet switch sales was particularly noteworthy, with data center switches exceeding $8 billion in revenue during Q3, more than doubling the sales from three years prior. Accton, Celestica, and Nvidia emerged as key players in the market share, while industry giants like Cisco and Arista continued to dominate overall switch sales. The accelerated adoption in AI back-end networks fueled the surge in Ethernet switch sales, with vendors focusing on back-end networks outperforming the market and gaining significant share.
Nvidia’s remarkable performance in the Ethernet switch market was highlighted in the Q3 earnings report, with a 167.7% year-over-year growth, reaching $1 billion in revenue. The company’s strategic vertical integration, offering a tightly coupled Spectrum Ethernet switch portfolio with GPUs, DPUs, and CUDA software, has positioned it as a formidable challenger to established players in the market. Industry experts anticipate continued growth in the Ethernet data center switching market, driven by global investments in AI infrastructure necessitating substantial upgrades to high-speed back-end networks.
