Coherent Inc

On August 27, the A-share CPO concept climbed steadily during the session. Sai MicroElectronics hit a 20-centimeter limit up, Qingshan Paper and Yangtze Optical Fibre and Cable sealed limit up, while Changxin Bochuang, Focuslight Technologies, and Kingshine Electronic rose more than 10 percent. Changyingtong, Hengtong Optic-Electric, and several other stocks also strengthened. On the news front, after the U.S. market close on August 26 Eastern Time, Nvidia reported better-than-expected earnings. Revenue for the second quarter of fiscal 2027 reached 96.2 billion dollars, up 106 percent year on year and above the market estimate of 92.38 billion dollars. Adjusted earnings per share came in at 2.22 dollars, up 120 percent year on year. Data center revenue was 89 billion dollars, also beating market expectations. On guidance, Nvidia expects third-quarter fiscal revenue to reach a midpoint of 108 billion dollars, up nearly 90 percent year on year and above the analyst estimate of 105.15 billion dollars. Adjusted gross margin is expected to be between 73.5 percent and 74.5 percent. The earnings call also revealed that Nvidia will work with Amazon Web Services to deploy an additional 2 million GPUs across AWS global infrastructure from 2027 to 2028, and expects fiscal 2028 revenue to grow about 70 percent. In addition, Nvidia announced full mass production of its Spectrum-X Ethernet photonics switching platform, marking the move of CPO solutions from technology validation to large-scale manufacturing. Overseas supply chain companies Lumentum and Coherent also disclosed shipment plans for CPO products. Several brokerages gave an optimistic outlook on China's optical communications sector, believing that investment sentiment in AI infrastructure continues to rise.

SK Hynix's new co-packaged-optics roadmap, published in Nature Electronics, proposes optical links connecting AI processors directly to pooled memory resources, expanding the potential market for Coherent, which competes across every CPO layer. Coherent's Data Center revenue rose 59% year over year to $1.62 billion in its fiscal fourth quarter, and Nvidia's $2 billion investment validates its manufacturing as strategically critical. The company has secured very-high-volume, multiyear orders from a leading AI data center customer and demonstrated a 6.4-terabit silicon-photonics CPO platform. Coherent estimates the CPO serviceable available market could exceed $15 billion by 2030, and SK Hynix's architecture could increase that by adding optical interfaces around memory. While the roadmap is not yet a commercial product, it signals that optics will move closer to processors and memory, positioning Coherent for a broader architectural shift in AI connectivity.

Coherent Corp. announced it will unveil its new PhotonLink platform at the 2026 European Conference on Optical Communication (ECOC) in Málaga, Spain, on September 21, 2026. The platform is designed to support co-packaged optics (CPO), near-package optics (NPO), and other forms of optical integration, covering the entire optical signal chain from light generation to electrical conversion. The unveiling will feature presentations by CEO Jim Anderson, EVP and CTO Dr. Julie Eng, and EVP Dr. Beck Mason, and will be available in person and via live webcast.

Thaweesuk Thammasak, an independent scholar of international economics, said at a Thun Hoon seminar that US sanctions on Iran have almost no effect because Iran has been sanctioned for 37 years and has already adapted. Iran has destroyed more than 80% of the main US bases in the Middle East and shot down more than 50 US refueling aircraft in Saudi Arabia, forcing the US to retreat to Jordan and making it unable to fly to Iran. The only remaining option is nuclear, but that is checked by Russia, China, and North Korea. Meanwhile, the Strait of Hormuz and the Red Sea have been closed, causing a global oil shortage and oil prices will surge this October, with the US Strategic Petroleum Reserve having only 14 days of supply left. Thaweesuk estimates that Iran is attacking the heart of the US by pushing bond yields higher, until the US has to intervene by increasing the auction size for buying its own bonds, with BlackRock helping manage the secondary market amid foreign selling of long-term bonds. If bond yields break above 6%, it will lead to a global stock market plunge and the Fed will have to cut rates to 0% immediately, which is an opportunity to buy cheap long-term bonds and sell for profit when prices rebound. For the Thai economy, Thaweesuk sees GDP slowing and staying sluggish because the government lacks a structural reform plan, with 2028 possibly as bad as 2027, and attracting data centers does not help spread income to the grassroots. He recommends watching stocks in the photonics supply chain such as Corning, Coherent, and Fibernet, along with trends in space technology and quantum computing where China is the leader.

Investors are rotating beyond Nvidia toward exchange-traded funds that capture the optical connectivity layer of artificial intelligence infrastructure. Global demand for AI-focused optical transceivers is projected to reach $26 billion by the end of 2026, a 57% year-over-year surge, according to TrendForce, while Yole Group projects the global optical transceiver market to hit $112.3 billion by 2031. The Roundhill Photonics & Optics ETF, ticker LYTE, generated $72 million in trading volume on its first day, surpassing the opening-day volume of the DRAM ETF at about $69.5 million. Among the funds highlighted, LYTE has gained 12.6% since its August 6, 2026 launch, the Tema Photonics & Optical ETF, ticker LAZR, has soared 33.9% over the past month, and the Corgi Lithography & Semiconductor Photonics ETF, ticker EUV, has rallied 14.5% over the past month.

Nvidia has moved its Spectrum-X co-packaged optics switches into mass production, with GF Securities projecting shipments to surge from 15,000 units in 2026 to 100,000 in 2027. The ramp is part of Nvidia's push to capture more AI-system spending beyond GPUs, as networking becomes a critical bottleneck in large AI clusters. TSMC has substantially expanded its CPO testing and inspection capacity, notably adding Insertion 2/3 capacity, according to GF Securities analyst Alicia Xia. Nvidia's NVL576-based scale-up systems using CPO or near-packaged optics are expected to begin adoption in the second half of 2027. Amazon's Trainium 4 is also expected to adopt near-packaged optics and Nvidia's NVLink Fusion, potentially extending Nvidia's technology into custom AI infrastructure, benefiting suppliers including Lumentum, Coherent, Semtech, Marvell, and Tower Semiconductor.

AXT soared again on Monday to lead optics stocks, with Coherent and Lumentum rallying on indium phosphide price hikes. AXT climbed 13.71% intraday to $92.83, extending a year-to-date gain of 399.33%, while Coherent rose 8.12% and Lumentum added 6.79%. The catalyst was a United Daily News report of Q4 indium phosphide substrate price increases topping 10%, the largest on record, versus earlier expectations of 3% to 5%. AXT's Q2 2026 revenue hit $47.6 million, up 164% year over year, with indium phosphide revenue at a record $30.7 million and non-GAAP gross margin of 45.0%. Coherent guided fiscal Q1 revenue to $2.2 billion to $2.4 billion, and Lumentum guided Q1 revenue to roughly $1.25 billion. WOLF climbs 6% Monday as a Mizuho note flags strong VR200 NVL72 ramps, adding a power-supply tailwind to the broader optics surge. NVIDIA disclosed a $3 billion stake in Coherent equal to nearly 5% of its 13F portfolio, and D.E. Shaw holds 2.25 million AXTI shares.

AI infrastructure stocks edged higher in pre-market trading on Monday after Anthropic's second quarter revenue surged to $11.5B, nearly two-and-a-half times the first quarter's $4.7B figure. The Dario Amodei-led firm also recorded positive adjusted operating income for the first time. Memory and storage companies rose, with Micron Technology up 3%, Seagate Technology up 2.5%, Sandisk up 3.5%, Western Digital up 2.6%, and Nasdaq newcomer SK Hynix up 3%. Networking stocks were mostly higher, with Lumentum Holdings, Ciena, and Corning all up 1.5%, while Applied Optoelectronics and Coherent both increased 1.7%. Chipmakers were modestly higher, with Intel and Nvidia both up about 0.7%, after Nvidia slashed its financial backing for a massive OpenAI data center project in Ohio from $250B to less than $120B. The largest hyperscalers were mixed, with Oracle down 1.1%, Microsoft down 0.7%, Google up 0.2%, and Amazon up 1.4%.

Nvidia announced that its Spectrum-X Ethernet silicon photonics switches have entered full mass production, driving a broad rally in A-share CPO concept stocks. On August 17, Jones Tech scored a second consecutive 20 percent daily limit, while T&S Communications and TZTEK Technology rose more than 10 percent. Gongjin Electronics and Tianyang New Materials hit their daily limits, and Shijia Photons and TFC Communication followed higher. The switch is the world's first 200 gigabit per lane CPO Ethernet switch system to enter mass production, cutting the number of lasers to one quarter of traditional designs, reducing power consumption to one fifth, lowering optical loss from about 22 decibels to about 4 decibels, and improving signal integrity by 64 times. Among overseas suppliers, Lumentum expects scale-up products to begin volume shipments in the second half of 2027, while Coherent's scale-out CPO will start contributing revenue in the second half of this year. Both Guolian Minsheng Securities and Sinolink Securities are bullish on the industry opportunities from accelerating CPO adoption.

Coherent reported second quarter fiscal 2026 results that beat Wall Street expectations, with revenue up 33.7% year over year to $2.05 billion and adjusted earnings per share of $1.74, 7.6% above consensus. The company guided next quarter revenue to $2.3 billion at the midpoint, 7.4% above analyst estimates, driven by exceptional demand in data center and communications segments. CEO James Anderson attributed growth to AI-driven optical networking and capacity expansion in 6-inch Indium Phosphide lines, while CFO Sherri Luther highlighted improved cost structure and operating leverage. Management noted data center and communications accounted for 79% of revenue with 66% year-over-year growth, and long-term agreements now extend into 2028 and beyond. Coherent shares traded at $345.80, down from $358 before the earnings release.

Nvidia is deploying its surging free cash flow into strategic investments, committing at least $6.5 billion to photonics companies including $2 billion each for Lumintum (LITE), Coherent Corporation (COHR), and Marvell Technology (MRVL), plus $500 million for Corning (GLW). The chipmaker also reportedly plans to invest up to $3 billion in privately held Lancium, an energy and data center infrastructure company backed by Blackstone, taking an initial 20% stake for $2 billion with a potential additional $1 billion tied to performance targets. Lancium owns the 1.2-gigawatt Lancium Clean Campus in Abilene, Texas, site of the $500 billion Stargate project. Nvidia's free cash flow has grown from $3.8 billion in fiscal 2023 to $96.67 billion in fiscal 2026, and the company is working with Blackstone, BlackRock, Apollo, Brookfield, Goldman Sachs, and KKR to mobilize over $500 billion in third-party capital for AI infrastructure.

Coherent and Lumentum both reported strong quarterly results as AI data centers shift from copper to optical connectivity. Coherent posted revenue of $2.045 billion, up 33.7% year over year, with its Datacenter & Communications segment contributing $1.615 billion, or 79% of sales, and non-GAAP EPS of $1.74, a 7.60% beat. Lumentum revenue hit $1.006 billion, up 109.3% year over year, with non-GAAP gross margin reaching 50.4%, a 1,260 basis point jump, and operating margin expanding 2,160 basis points to 36.6%. Coherent guided Q1 FY27 revenue to $2.20 billion to $2.40 billion, while Lumentum guided to $1.225 billion to $1.275 billion with operating margin of 39.5% to 40.5%. Coherent is doubling internal indium phosphide output by year-end and again by 2027, with up to $50 million in CHIPS Act funding, while Lumentum has an OCS backlog above $400 million.

Coherent reported fourth quarter results that exceeded expectations, supported by strong AI infrastructure demand in its data center optical networking business. The company issued an upbeat outlook for the first quarter, citing continued AI driven demand for its networking solutions, with revenue guidance of US$2.2b to US$2.4b. Nvidia committed a US$2b investment to expand Coherent's research, manufacturing, and operations capabilities as part of a wider partnership. The stronger Q4 and higher guidance line up with expectations for robust AI driven datacom orders, while the Nvidia commitment supports the thesis around heavy internal manufacturing investment, such as indium phosphide capacity. Execution risk remains, especially around competition from low cost Asian optical suppliers and the need for high capital spending to pay off in margins and earnings quality.

Kechuang 100 ETF Penghua rose more than 2.3% intraday, lifted by better-than-expected earnings from a US optical communications giant and clinical progress in innovative drugs, driving gains in optical communications and biopharmaceutical sectors. Lumentum forecast first-quarter net revenue for fiscal 2027 in a range of 1.23 billion to 1.28 billion US dollars, above the market estimate of 1.15 billion dollars. Coherent Corp guided next-quarter revenue at a midpoint of 2.3 billion dollars, higher than analysts' expectation of 2.14 billion dollars. In pharmaceuticals, several drugmakers disclosed new clinical advances in innovative drugs, with self-developed products spanning small molecules, peptides, biologics, siRNA, PROTAC and other technology types achieving phased breakthroughs. As of 10:14 on August 13, 2026, the SSE STAR 100 Index surged 2.56%, while Kechuang 100 ETF Penghua rose 2.36% to 1.86 yuan. Xiangcai Securities noted that innovative drug overseas expansion and value realization have become the core focus, suggesting attention to biotech companies with specific innovative drug technology platforms, integrated pharmaceutical firms, and upstream CXO and research reagent providers in the innovative drug supply chain.

Ping An STAR 50 ETF rose 2.39% to 1.29 yuan, while the SSE STAR 50 Index gained 2.23%. In news, US optical communications giants have been releasing earnings. Lumentum forecast first-quarter net revenue for fiscal 2027 in a range of 1.23 billion to 1.28 billion US dollars, above market estimates of 1.15 billion. Coherent Corp guided next-quarter revenue to a midpoint of 2.3 billion dollars, higher than analysts' expectations of 2.14 billion. China Galaxy Securities believes that recent capacity expansions and private placements among related manufacturers signal that the optical chip capacity bottleneck is being systematically resolved. With mass shipments of 800G and 1.6T optical modules and the evolution of silicon photonics and CPO and NPO technology paths, the profitability of the optical communications sector is expected to improve at the margin.

Coherent Corp. said it expects to achieve its first quarter with over $3 billion of revenue by the end of fiscal 2027, after reporting record fourth-quarter revenue of $2.05 billion and non-GAAP earnings per diluted share of $1.74. CEO James Anderson said fiscal 2026 revenue rose 28% on a pro forma basis to a record $7 billion, and that the company sees no signs of attenuation in customer demand, with orders extending into calendar 2028. The company plans to unveil its PhotonLink integrated-optics platform in September and expects initial revenue from related products in the December quarter. CFO Sherri Luther guided fiscal first-quarter 2027 revenue to between $2.2 billion and $2.4 billion, with non-GAAP gross margin of 39.5% to 41.5% and non-GAAP EPS of $1.85 to $2.05. Capital expenditures rose to $556 million in the fourth quarter, and management said indium phosphide capacity remains the primary constraint, with output expected to double by the end of the current quarter.

AI infrastructure stocks surged on Wednesday after blowout results from AI server hardware maker Supermicro and neocloud providers CoreWeave and Nebius Group. Nebius stock surged after quarterly revenue topped analyst expectations, while Supermicro reported fourth quarter results that beat analyst estimates on earnings and issued an upbeat forecast that sent shares higher by more than 6%. AI hosting peers Applied Digital and IREN also moved higher after CoreWeave posted quarterly results highlighting accelerating demand and a surging backlog. Lumentum shares gained after the maker of optical and photonic products for data centers posted fiscal fourth quarter revenue that more than doubled to $1.01 billion, and peers Coherent and Ciena both jumped. The memory and storage complex also rose, with the Roundhill Memory ETF up 4%, SanDisk up 4%, and Micron and SK Hynix each up 4%.

Coherent shares climbed 5.7% in premarket trading to $347.37 after rival Lumentum Holdings reported fiscal fourth-quarter revenue and adjusted earnings above Wall Street forecasts and issued stronger-than-expected first-quarter sales guidance, reinforcing expectations of robust demand for optical networking equipment. The positive read-through encouraged investors ahead of Coherent's own fiscal 2026 fourth-quarter results due after the NYSE close, with analysts forecasting revenue of approximately $1.98 billion and non-GAAP earnings per share of $1.43, representing roughly 93% year-on-year growth. Raymond James lifted its price target on Coherent to $435 from $371 while maintaining a Strong Buy rating, and a Federal Communications Commission proposal to prohibit imports of Chinese optical transceivers could provide a significant advantage to domestic manufacturers, with Coherent positioned as a potential major beneficiary. The company's broad photonics portfolio and global manufacturing operations provide exposure to expanding demand for AI infrastructure, supported by initiatives including Nvidia's $2 billion investment aimed at expanding Coherent's U.S. manufacturing capacity. Attention now turns to Coherent's fiscal fourth-quarter report and its strategic relationship with Nvidia, with the results likely to determine whether the latest share-price recovery can maintain its momentum.

Goldman Sachs Asset Management's Sung Cho says the AI trade is rotating from graphics processors to optical and fiber equipment makers, naming Lumentum and Coherent as key beneficiaries. Cho argues that as AI workloads shift from training to inference, the bottleneck is no longer compute speeds but chip-to-chip and server-to-server communication, driving demand for optical connectivity that is extremely hard to scale. Lumentum reported fiscal Q3 2026 revenue of $808.4 million, up 90.1% year over year, with non-GAAP EPS of $2.37 and operating margin expanding 700 basis points sequentially to 32.2%, while Coherent posted Q3 FY2026 revenue of $1.81 billion, up 20.5% year over year, with its Datacenter & Communications segment contributing $1.36 billion, up 40.6% and now 75% of total revenue. Lumentum shares closed at $813.51, up 599.67% over one year, and Coherent finished at $325.15, up 76.17% year to date.

The U.S. economy shed 23,000 nonfarm payrolls in July, triggering Wall Street's best week since April as investors concluded the Federal Reserve's next move would no longer be a rate increase. Private employers added 30,000 jobs, well short of the 78,000 expected, while May and June figures were revised down by a combined 103,000, and average hourly earnings rose just 3.2% year-over-year, the slowest pace since 2021. The S&P 500 rallied 3.5% for the week and the Nasdaq 100 jumped 4.8%, while gold surged 7.5% to $4,347.70 an ounce, its strongest week in seven months. Among individual stocks, Coherent Corp. soared 43.5% on peer results and a JPMorgan price-target increase, Palantir Technologies rose about 29% after second-quarter revenue climbed 93% to $1.94 billion and full-year guidance was raised to $8.15 billion, and Zebra Technologies posted a 45% earnings beat with adjusted earnings of $6.35 a share. On the downside, The Trade Desk lost roughly a quarter of its value after third-quarter guidance of at least $650 million fell far below the $805 million expected, Honeywell Aerospace cut its full-year organic sales growth outlook to 4%-5% from 7%-9%, and DaVita fell 17% despite beating estimates because it reaffirmed an outlook whose midpoint sat below consensus. Attention now turns to the July consumer price index on August 12, with economists expecting headline inflation to ease to 3.4% and core inflation to slow to 2.5%.

Applied Optoelectronics and Coherent each surged 13% on Friday after Applied Optoelectronics reported second-quarter revenue nearly doubled to $191.9 million and swung to a non-GAAP net income of $5.5 million from a loss of $8.8 million a year earlier. Lumentum added 8% as the rally extended across optical communications stocks, with the iShares Semiconductor ETF up 2% and the NASDAQ 100 up 0.94%. A weaker-than-expected July jobs report reduced expectations for a Federal Reserve rate hike in September, providing an additional tailwind for growth-oriented technology shares. Applied Optoelectronics' results reinforced optimism around demand for high-speed optical transceivers driven by AI data-center investment, while Coherent and Lumentum moved higher without company-specific catalysts.

The Federal Communications Commission is drafting a rule to ban imports of new Chinese optical transceivers, a move that could reshape the AI supply chain given China controls more than 50% of the global market. Applied Optoelectronics, a Texas-based manufacturer, reported fiscal first-quarter revenue of $151.14 million, up 51.4% year over year, and has expanded capacity to nearly 100,000 units of 800G transceivers per month. Coherent, which received a $2 billion investment from Nvidia, posted fiscal third-quarter revenue of $1.81 billion, with its datacenter and communications segment up 40.6%. Lumentum saw revenue surge 90.1% to $808.4 million in its fiscal third quarter, while contract manufacturer Fabrinet reported record revenue of $1.21 billion. Credo Technology, which offers copper-based alternatives, more than tripled its full-year revenue to $1.34 billion. All five companies have posted four consecutive earnings beats and guided for sequential growth, with the FCC aiming to publish the rule this year.

Counterpoint Research warned that Chinese optical module makers control roughly two-thirds of global transceiver supply and no Western alternative can absorb that volume within one to two years, casting doubt on a proposed U.S. import ban. The FCC is drafting a ban on new Chinese optical transceiver models, with officials hoping to publish the measure before year-end, Reuters reported. Analyst Neil Shah cautioned that Coherent and Lumentum lack the cleanroom capacity, automated packaging infrastructure, and yield scale required to absorb Innolight and Eoptolink's volume within a 12-to-24-month horizon, which could cause cost escalation and delayed AI cluster deployments for hyperscalers like AWS, Microsoft, Meta, and Google. Chinese module makers as a group supply approximately 60% of global optical datacom transceiver revenue, with Zhongji Innolight alone holding roughly 27% of the market and generating 62% of its revenue from the United States in the first quarter of 2026. The proposed ban follows Innolight's $6.8 billion Hong Kong listing and its addition to the Pentagon's list of alleged Chinese military-backed firms, while U.S.-listed optical networking stocks surged on Tuesday with Coherent rising 11%, Applied Optoelectronics gaining 18%, and Lumentum climbing 7%.

Asia Plus Securities assesses that the drop in Brent crude oil below $80 per barrel, driven by hopes of reopening the Strait of Hormuz, is a positive factor for global stock markets. However, the SET Index has limited upside because commodity-related stocks account for as much as one-quarter of total market capitalization. The firm recommends rotating into laggard domestic play stocks. Financial markets have reduced the probability of the US Federal Reserve raising its policy rate to 4.0% to just 53%, down from 67% the previous day, while US Treasury yields have declined, supporting a rebound in US and Asian stock indices. In the technology sector, two key issues are currently the main drivers. First, the ban on photonics components from China is positive for US manufacturers, with short-term speculative opportunities recommended in DR: COHR23 and DR: LITE80. Second, the launch of HBF memory chip technology by SanDisk and SK Hynix is expected to accelerate SanDisk's growth, with the market forecasting revenue growth of 354% year-on-year and earnings per share surging as much as 11,751% year-on-year. Historically, after earnings announcements, the stock price has risen by an average of 6% on the next trading day. For Thailand's July 2026 inflation, the market expects a reading of 2.55% year-on-year, making it highly likely that the Bank of Thailand will keep its policy rate at 1.0% through the end of this year. Foreign capital flows have begun to slow and are signaling a rotation into stocks tied mainly to domestic economic activity. Another risk to watch is the direction of the yen, as speculators betting on a weaker yen are facing pressure from the Bank of Japan.

Shares of Applied Optoelectronics surged 17% to $129.34 on Tuesday after Reuters reported that the Trump administration and the FCC are drafting a ban on U.S. imports of new Chinese optical transceivers used in AI data centers. Coherent climbed 11% to $319.80 and Lumentum gained 6% to $829.42, extending a multi-day rally for the optical group. The reported draft rule, which officials aim to finalize this year, would benefit domestic and non-Chinese suppliers while pressuring Chinese makers such as Zhongji Innolight, which holds a 27% global transceiver share. Applied Optoelectronics, which has guided second-quarter 2026 revenue to $180 million to $198 million and is targeting over $1 billion in full-year 2026 sales, is up 216% year to date. The iShares Semiconductor ETF added 5%, trailing the pure-play optics names because optical transceiver makers are a small slice of the broad semiconductor fund.

Coherent shares surged 13.56% following a report that the Trump administration is drafting a ban on US imports of new Chinese optical transceivers. The Federal Communications Commission is writing the measure and aims to publish it this year, according to four people familiar with the matter. Coherent and Lumentum are the domestic alternatives that stand to benefit, though the Foundation for American Innovation says neither has the scale to replace Chinese vendors. The ban would likely hit Zhongji Innolight, which holds 27% of the global data center transceiver market and generates 90% of its revenue outside China, and was added to the Pentagon's list of alleged Chinese military-backed companies in June. A ban could raise costs for cloud operators such as Amazon Web Services if they are forced to switch suppliers.

Photonics is emerging as a potential solution to one of AI's biggest challenges: moving data quickly and efficiently between chips in data centers. NVIDIA has invested $2 billion each in photonics companies Lumentum Holdings and Coherent, and also took a $2 billion stake in Marvell Technology to collaborate on silicon photonics. Goldman Sachs estimates the total addressable market for AI optical networking will reach $154 billion by 2028. The actively managed KraneShares Photonic and Optical ETF LUMA provides exposure to companies developing optical interconnects, transceivers, and fiber-optic cables, while the KraneShares Artificial Intelligence and Technology Public and Private ETF AGIX holds a stake in Ayar Labs, a private company backed by NVIDIA, Advanced Micro Devices, and Intel. Other photonics ETFs include the Corgi Lithography & Semiconductor Photonics ETF EUV, Tuttle Capital Pure Play Photonics ETF FOTO, and Tema Photonics & Optical ETF LAZR.

A model from 24/7 Wall St. projects that a $1,000 investment in Coherent could grow to $1,543.63 by August 2027 under a bull-case scenario, representing a 54.36% total return. The base case forecasts a more modest 6.25% return to $305.18 per share, while the bear case sees a 17.7% decline. Wall Street analysts are more optimistic, with a consensus target of $391.45 and 77% rating the stock a buy. The bullish thesis is driven by Coherent's $2 billion collaboration with NVIDIA and a 40.6% year-over-year jump in its Datacenter & Communications segment revenue to $1.362 billion in the third quarter of fiscal 2026. However, risks include high volatility, a recent 11% single-day drop triggered by Alphabet's heavy capital spending report, and a soft Industrial segment.

The global AI infrastructure market could expand at a 26.6% CAGR from 2026 to 2034, according to Fortune Business Insights, and three stocks are positioned to capitalize on that trend. Marvell Technology sells high-speed connectivity chips, custom ASICs, Ethernet switches, and DPUs that data centers need to handle demanding AI workloads. Coherent, the world's leading photonics company, produces optical transceivers and components that are replacing aging copper cables with fiber-optic cables offering greater bandwidth and better thermal resistance. Vertiv produces thermal management, liquid cooling, and UPS systems that cool the latest AI chips, and it is co-developing physical infrastructure and liquid cooling systems with Nvidia. Analysts expect Marvell's adjusted EBITDA to grow at a 44% CAGR from fiscal 2026 to fiscal 2029, Coherent's adjusted EBITDA to grow at a 44% CAGR from fiscal 2025 to fiscal 2028, and Vertiv's adjusted EBITDA to increase at a 38% CAGR from 2025 to 2028, with the stocks trading at 43, 39, and 34 times current-year adjusted EBITDA respectively.

AXT is positioning itself to benefit from co-packaged optics, a technology that could become its next revenue pillar as AI data center connectivity evolves. Management expects CPO adoption to accelerate, with commercial opportunities likely emerging from late 2027 onward, and is expanding indium phosphide production capacity through 2028 while advancing 6-inch InP wafer technology. A record InP backlog and a multi-year supply agreement with Coherent, backed by a $22.3 million customer prepayment, provide better visibility into future demand. The Zacks Consensus Estimate projects 2027 revenues of $211.85 million, representing 49.8% year-over-year growth. Shares of AXT have soared 245.6% year-to-date, though the stock trades at a trailing 12-month price-to-sales ratio of 31.42, significantly above the industry average of 14.38.

Coherent stock may be about 11.2% undervalued relative to its intrinsic value estimate, even after a roughly sevenfold return over the past three years. A Discounted Cash Flow model using projected free cash flows points to an intrinsic value of about $350 per share, while the current price sits below that level. On a price-to-sales basis, Coherent trades at about 9.2 times, below a tailored fair multiple of roughly 11.6 times, though above the Electronic industry average of about 3.0 times and a peer average around 5.9 times. The valuation picture is mixed, with only three out of six broader checks suggesting the stock is cheap, and the discount depends on the company turning projected cash flow improvements into reality. Key factors include NVIDIA's $2,000,000,000 investment, Coherent's Texas indium phosphide expansion, and debates over future AI infrastructure spending.

Coherent's recent post-earnings correction has made the stock a more compelling investment opportunity. The company delivered a strong quarterly performance, raised its outlook, and highlighted record backlog visibility extending through 2028, while reaffirming that fiscal 2027 growth is expected to exceed fiscal 2026 levels. Despite a 19% decline over the past month, the stock remains up 218% over the past year, and the pullback has brought its forward 12-month price-to-earnings ratio of 36.29 times closer to the industry average of 20.89 times. The Zacks Consensus Estimate for 2026 earnings is $5.47 per share, indicating 55% year-over-year growth, with revenues expected to reach $7.06 billion, up 21.5%. Coherent continues to outperform optical networking peers Lumentum and Fabrinet, benefiting from stronger AI infrastructure exposure and expanding production capacity, and currently holds a Zacks Rank of 1, or Strong Buy.