Optical Networks: High-Speed Connections for the Digital Future

In our highly technologized world, fiber-optic networks and 5G mobile communications form the foundation for growth and innovation. As businesses and households consume more and more data, the demand for ultra-fast connections is rising dramatically. For example, Deutsche Telekom installed seven new fiber-optic connections per minute last year; in total, more than 13 million households can already sign up for fiber-optic service and surf the web at gigabit speeds. Peak data transfer rates of around two terabits per second have already been measured. Researchers from Japan demonstrated last year that it can be done even faster. In a laboratory setting, data was transmitted at 1.02 petabits per second over a 19-core fiber-optic cable. To put that in perspective: that would be enough to download the entire Netflix library in just one second. Such figures spark curiosity about the topic of “optical networks” (derStandard, 2025).

One thing is certain: Modern communication is no longer possible without fiber optics and 5G. But what exactly is behind this technology? Fiber-optic cables consist of thin strands of glass that can transmit light signals over long distances with minimal loss. Compared to copper wire, they enable significantly higher bandwidths, lower latency, and are immune to electromagnetic interference. This makes them ideal for connecting, for example, cell towers, data centers, undersea cables, or corporate networks. 5G mobile communications, in turn, are driving demand for fiber optics, as every base station requires a high-speed backbone. The need for fiber-optic infrastructure will continue to grow significantly due to the expansion of 5G and ongoing digitalization: Precedence Research estimates that the global market for fiber-optic technology will grow from $11.48 billion in 2026 to approximately $20.86 billion in 2035, corresponding to a compound annual growth rate (CAGR) of 6.86 percent (Precedence Research, 2026). This makes the outlook for the new Solactive Optical Networks Technology Index very promising. This newly designed index brings together companies active in optical networks and components. It gets even better: Investors can participate directly in the performance of this sector through a Vontobel tracker certificate that has just been launched. But before we delve deeper into the product, it’s worth taking a closer look at the market itself: its size, drivers, opportunities, and risks.

The term “optical networks” encompasses all components and systems that transmit data using light. These range from fiber-optic cables and light sources such as lasers to optical modules and complete network systems, which telecom providers and hyperscalers, who operate massive cloud and data center capacities, use to transport enormous amounts of data over long distances. For example, the MAREA transatlantic cable between the U.S. state of Virginia and Bilbao, Spain, uses state-of-the-art fiber-optic technology. However, optical networks not only connect continents but also play a key role in many other areas: In telecommunications and broadband networks, they provide Internet access via Fiber-to-the-Home (FTTH) or in mobile network backbones. Large data centers and cloud providers use them for server interconnects and to connect with one another. Corporate networks, the aerospace industry, and military applications also benefit from high-speed data transmission. This enables high bandwidths for video conferencing, big data, AI applications, and precise sensor technology. New partnerships and investments underscore the enormous growth potential: Nvidia and Corning recently announced a massive expansion of fiber-optic production in the U.S. Together, they are building three new fiber-optic plants aimed at increasing capacity for AI data centers tenfold. Telecom giant AT&T, for its part, has announced that it will invest more than $250 billion in U.S. telecommunications infrastructure over a five-year period through 2030. The investment will focus on expanding the company’s fiber-optic and 5G mobile networks.

These figures show that optical networks represent a massive and rapidly growing market. The main drivers are the global demand for data and new applications. The pandemic, for example, has led to a boom in video conferencing, remote work, and streaming, which has increased the demand for bandwidth. However, 5G promises the biggest boost. New countries and networks are added every year. The cloud era and AI applications are also driving up data volumes. AI-powered services, data centers for autonomous vehicles, and high-resolution VR all require ever-higher data rates between servers and endpoints.
Despite the rosy outlook, it’s not all sunshine and roses. A major risk is the high investment costs and long project timelines involved in expanding fiber-optic networks. Laying fiber-optic cables, building network distribution points, and connecting end customers costs billions and requires years of planning. Economic uncertainty or political delays can slow down such projects. If economic growth stagnates or spending is reallocated, for example, due to inflation or other crises, planned fiber-optic projects could be postponed.

Currently, however, the market is focused on growth. This is also underscored by a new multibillion-dollar supply contract between Amazon and the fiber-optic manufacturer Corning. The high demand is also reflected in the financials of the Kentucky-based fiber-optic pioneer: In the first quarter of 2026, revenue grew by double digits, and profits more than doubled. About 40 percent of the company’s revenue and more than half of its profit now come from the Optical Communications division (Corning, 2026). Kohoku Kogyo focuses less on the cable itself and more on the optical components surrounding it. The Japanese specialist primarily manufactures optical isolators and filters used in submarine cables and long-haul networks, and holds a global market share of approximately 50 percent for optical isolators in submarine cables. Fabrinet is known as a leading supplier of optical components and precision manufacturing and produces, among other things, optical lens systems, laser light modules, and high-quality packaging for optoelectronic components. Its business model as a pure contract manufacturer allows the company to produce for multiple network equipment suppliers simultaneously. In this way, the company benefits from the general boom without directly competing with its customers. In the third quarter of 2026, Fabrinet—driven primarily by strong sales in the telecommunications sector, generated record revenue of 1.21 billion U.S. dollars, up 39 percent year-over-year (Fabrinet, 2026). Revenue at Marvell Technology is also skyrocketing. The semiconductor company, which develops chips for data centers and enterprise networks, is currently benefiting in particular from custom AI chips for cloud providers and networking ASICs. In addition to data centers, Marvell is also seeing strong orders from the optical networking sector: routers, switches, and optical modules are equipped with its chips. But it’s not just the U.S. and the Far East that are leading the way in optical network technology—Europe also has a lot to offer. For instance, Nokia has long been active not only in mobile communications but also strengthened its portfolio in optical networks with the acquisition of Infinera in 2024. Nokia supplies equipment for 5G and fixed-line networks, including fiber-optic equipment, and is benefiting from global network expansion. Recently, Nokia has entered into partnerships with TIM Brasil and Deutsche Telekom to jointly advance AI-enabled networks and Open RAN technologies. Similar agreements exist with Telefónica, and others pertain to network architectures for data centers. With the global push toward 5G and digitalization, there is significant demand for modern network hardware, and Nokia is well-positioned to capitalize on this opportunity.

Each of the five companies mentioned is a member of the new Solactive Optical Networks Technology Index and represents a specific segment of the market. Ten additional companies are included, so that the index ultimately reflects the entire value chain of optical networks. The exact index concept is clearly illustrated in the chart at the top right of page 21. Investors who wish to participate in the long-term benefits of digitalization can profit from this growth through a suitable financial product from Bank Vontobel without having to select individual securities. The recently launched tracker certificate based on this index mirrors the index’s performance on a 1:1 basis. It is therefore not a leveraged product, but rather a direct exposure to the index without a cap or knock-out clause. Investors participate in both the gains and losses of the index. This enables a targeted investment in the optical networks sector without having to purchase individual stocks. It is important to note that, like any equity investment, this certificate is subject to market fluctuations. In summary: The optical networks sector offers long-term opportunities. The global expansion of fiber-optic backbones and 5G front-ends, driven by the data tsunami and AI developments, is expected to continue generating high growth rates. At the same time, investors should not ignore the risks, growing competition, political uncertainties, and high barriers to investment can also cast a shadow. With the new Vontobel certificate, however, there is now a focused financial instrument that allows investors to participate in this megatrend with broad diversification. Those looking to bet on the “digital highway” can thus easily invest in a basket of leading optical networking companies, ranging from established giants to emerging specialists.