Laser Focus: 2 Optical Stocks Lighting Up AI

AI data centers are shifting from copper cabling to optical transceivers because copper cannot handle high-speed signals over meaningful distances without heat and loss. Lumentum Holdings and Coherent Corp. are positioned as key suppliers of lasers and optical components benefiting from the 800G and 1.6T photonics upgrade cycle. Both companies reported strong quarterly earnings beats and hold Moderate Buy analyst ratings, though investors should weigh valuation, beta, and supply risks before entering.

Data centers running complex artificial intelligence models need immense bandwidth, but traditional copper cabling is hitting a wall. At high speeds, copper struggles to transmit signals beyond one to two meters without generating excess heat and signal loss. To keep GPUs communicating without latency bottlenecks, companies are accelerating the transition from copper wires to optical connections. This upgrade underpins a multi-billion-dollar photonics cycle centered on 800-gigabit and 1.6-terabit optical transceivers. For investors interested in the physical foundation of AI, this shift expands the opportunity set beyond semiconductor names to the specialized manufacturers building the lasers and optical transceivers that connect next-generation server clusters. Moving from copper to light alters the economics of data transmission across modern computing fabrics.

Direct-attach copper cables were the standard for short-distance server connections during earlier cloud expansions. However, as processing speeds advance toward 800G and 1.6T, copper faces severe physical limits. When high-speed electrical signals travel through copper, they degrade rapidly over short distances. Overcoming this loss requires thicker wiring and supplemental electrical retimers, both of which draw more power and produce heat inside tightly packed hardware racks. Optical transceivers solve much of this problem by transforming electrical data into light pulses using semiconductor lasers. These light signals can travel through fiber-optic strands for hundreds of meters with minimal signal loss and negligible heat generation at the cable layer. This engineering shift is tightening supplies of specialized optical components. Indium phosphide lasers and electro-absorption modulated lasers require complex manufacturing facilities that can take years to build and qualify. As data center builders demand immediate transceiver shipments, suppliers that control their own laser production are gaining pricing power.

As cloud providers rebuild their networks, Lumentum Holdings Inc. NASDAQ: LITE stands out as an upstream supplier of optical components. The company engineers and manufactures the underlying laser diodes, photonic integrated circuits, and optical subsystems required to move light between servers. Lumentum Today LITE Lumentum $930.91 +37.30 (+4.17%) As of 09/18/2026 04:00 PM Eastern 52-Week Range $144.52 ▼ $1,085.68 Price Target $1,053.83 Add to Watchlist Lumentum recently saw its share price trade near $950 , backed by trading volume of approximately 6.46 million shares. That turnover generated about $5.94 billion in transaction volume, reflecting focused institutional capital inflows. During the quarterly earnings report on Aug. 11, 2026 , Lumentum reported earnings per share (EPS) of $3.23, beating consensus expectations of $2.97. Quarterly revenue rose 109.3% year over year (YOY), pushing annual sales to about $3.01 billion. Lumentum carries a trailing 12-month net loss of $6.94 billion, reflecting historical non-cash goodwill and asset ...