Lumentum's AI Optics Rally: 1000% Gain and Why It Can Continue

Coherent Corp. announced on September 17 an upgraded Pluggable Optical Line System that covers the full C-band and fits in a compact QSFP module, the same slot ordinary transceivers use. The system can pack 32 wavelengths onto a single pair of fibers, which Coherent says adds up to as much as 25.6Tbps of traffic on links running 2km to 200km, and it is designed for the latest 800G coherent optics. Coherent says the system is generally available and already shipping in high volume, in 400G and 800G versions that work with existing network setups, according to Madhu Krishnaswamy, who runs the company's telecom transport unit. The launch follows Coherent's fiscal fourth quarter, which ended June 30, when it reported revenue of $2.05 billion, up 34% from a year earlier, and non-GAAP earnings per share of $1.74, up from $1.00. Management guided to revenue of $2.2 billion to $2.4 billion for the first quarter of fiscal 2027, though the announcement puts no sales figure on the new product, so its contribution to a company that booked $2.05 billion in a quarter cannot be sized from what has been published.

Nvidia has committed at least $6.5 billion to photonics companies over the three months prior to May 2026, including $500 million to Corning for advanced optical connectivity solutions and $2 billion each to Lumentum, Coherent and Marvell, according to CNBC. The impact has been significant, with Marvell shares gaining 183.4% year to date, while Lumentum, Corning and Coherent have advanced 142.5%, 68.8% and 60.3%, respectively. Goldman Sachs projects the total addressable market for optical networking to grow from roughly $15 billion in 2026 to about $154 billion by 2028, a more than ninefold increase. Adoption of co-packaged optics is expected to accelerate starting in 2027, reaching roughly 20% to 30% penetration by 2028, while Mordor Intelligence estimates the global photonics market will reach $1.46 trillion by the end of 2026. Investors seeking diversified exposure can consider the Roundhill Photonics & Optics ETF LYTE, with $254.2 million in assets under management across 19 holdings; the KraneShares Photonic and Optical ETF LUMA, with $9.76 million in net assets; and the Tema Photonics & Optical ETF LAZR, with $94 million in net assets across 27 companies.

Amphenol's IT datacom business, which represented 43% of the company's total sales in the second quarter of 2026, saw revenues surge 89% year over year and 63% organically, with management saying the AI revenue run rate has reached roughly $10.5-$11 billion. Management noted that virtually all of the 22% sequential IT datacom growth in the quarter came from AI-related products, as customers require more copper, optics and power for larger, more complex AI clusters. The company's acquisition of CommScope contributed more than $1.2 billion in sales in the quarter, with CommScope's IT datacom business nearly doubling year over year; management expects that market to account for just under half of CommScope's 2026 sales, compared with roughly one-third in 2025. Amphenol faces tough competition from TE Connectivity, whose Digital Data Networks sales rose 34% year over year in the third quarter of fiscal 2026 with bookings up more than 70% year to date, and from Marvell Technology, whose data-center revenues increased 46% year over year to $2.17 billion in the second quarter of fiscal 2027. Amphenol shares have risen 16% year to date, trailing the broader Zacks Computer and Technology sector's 17% gain, and trade at a forward 12-month price/earnings of 25.32X versus the sector's 20.38X, while the Zacks Consensus Estimate for earnings stands at 72 cents per share, up 5 cents over the past 30 days and implying 53.19% growth.