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Optical stocks climb as analysts flag AI bottleneck: Lumentum rises 4%, Applied Optoelectronics and Corning gain 3%, Coherent sits out the rally. Analysts are calling optics a critical bottleneck in the AI buildout, and most optical stocks are surging on that thesis, but one of the sector's biggest names is conspicuously sitting out the rally while quietly building the capacity that could... Optics/photonics stocks are extending their rebound as more analysts argue that optics are a choke point in the AI expansion, yet Coherent (NYSE:COHR | COHR Price Prediction) is sitting out the move. Lumentum Holdings (NASDAQ:LITE) stock is at $897 in afternoon trading, up 4%. Applied Optoelectronics (NASDAQ:AAOI) stock is at $80, up 3%. Coherent stock is at $237, up by only 0.4%, which leaves one of the group's biggest names behind its peers. Why optical stocks keep rebounding. The gains for Lumentum and its peers extend a recovery that's been building as the AI-bottleneck argument gains support. Evercore ISI analyst Amit Daryanani pointed to three drivers in an October 27 note. The first is that U.S. regulators are expected to limit imports of foreign-produced optical transceivers by the end of the first quarter of 2027, which Daryanani said would effectively shut Chinese suppliers, which make about two-thirds of all optical transceivers today, out of the U.S. market for next-generation 3.2-terabit (3.2T) transceivers. Such a move would slow AI deployment but help U.S. and allied makers, in his view. His other two drivers were signs that expansion plans at indium phosphide manufacturers are wavering and renewed confidence that AI spending will last. He called optics "a critical bottleneck to the AI buildout." That background has Lumentum and Applied Optoelectronics running well ahead of the SPDR S&P 500 ETF Trust (NYSEARCA:SPY), which is at $771, up 0.2%. (The optics names are one slice of the AI buildout; we rounded up seven more suppliers behind the data centers, from power to cooling, in a free report you can grab here.) Lumentum has also picked up new analyst support. StoneX started coverage of Lumentum with a Buy rating and a $1,200 price target on October 26, and Jefferies analyst Blayne Curtis raised his price target on the stock to $1,250 from $1,200 on October 20. October was rough for the group before the recovery took hold. Glass and fiber maker Corning (NYSE:GLW) is down 17% over the past month. Applied Optoelectronics has lost 22% over that span, and Coherent has given up 20%. Lumentum sells scarcity while Coherent builds capacity. Scarcity grounds the Lumentum story. CEO Michael Hurlston stated on October 8 that Lumentum can't meet an estimated 70% of demand for some products through 2027, and he has described the company's optical parts as "completely sold out" through early 2029. Lumentum's fiscal 2026 revenue rose 83% to $3.01 billion, and the company guided its fiscal Q1 2027 revenue to $1.225 billion to $1.275 billion with adjusted earnings per share of $4.05 to $4.35. Those numbers show why investors betting on Lumentum need tight supply to last. Free Report, Just Released Why Didn't COHR Make The Top 10 List? 24/7 Wall St has helped investors make money for over two decades, and our top analysts just finished ranking the definitive Top 10 Stocks To Buy Now. Not the ten biggest companies. Not the ten everyone is arguing about. The ten best stocks to buy right now. And COHR didn't make the cut! The report is free, and you can see why we think each stock is a top investment today. Coherent is the balance. NVIDIA (NASDAQ:NVDA) and Coherent stated that NVIDIA invested $2 billion in Coherent, as it did in Lumentum, and Coherent set out to double its indium phosphide laser output by the end of September and more than double it again before 2028. One way to read the split is that Lumentum profits as long as shortages persist, and Coherent is adding the capacity that could narrow them. Year to date (YTD), Coherent stock is up 28%, by far the smallest gain of the four, while Lumentum stock is up 143%. Applied Optoelectronics and Corning are rising with the rest of the group. Shares of Applied Optoelectronics are up 128% YTD. Corning stock is at $131, up 3%. So far this year, the glass and fiber maker has gained 50%, and it fills a different link in the optical chain than the laser and transceiver makers. Lumentum's next report tests the optical shortage trade. Lumentum's upcoming fiscal first-quarter report will show whether its laser-chip shortfall is narrowing. Any regulatory action on transceiver imports could change competition for U.S. makers such as Applied Optoelectronics, while progress on Coherent's capacity expansion bears on how long the shortage lasts. Microsoft (NASDAQ:MSFT) reports results after the close on October 28. Alphabet (NASDAQ:GOOGL) is scheduled the same evening, and both reports offer a read on the AI spending that drives demand for Lumentum and its peers. The bulls could argue that import limits and wavering indium phosphide expansion could keep optical parts scarce, supporting pricing for Lumentum. The bears can point to Coherent's added laser output and October's steep decline as signs that the shortage trade can reverse quickly. Investors may want to follow optical supply trends closely until the debate over optical supply resolves. Got $1,000? Before you buy COHR, read this. If you have cash sitting in your account right now, give this two minutes. After more than two decades of helping investors beat the market, our top analysts at 24/7 Wall St. put together a definitive report on the Top 10 Stocks To Buy Today. And COHR wasn't one of them. They combed the entire market. It's not 10 ideas, not 10 stocks everyone is talking about, it's what their research points to as the 10 best stocks to buy right now, and it's free. Read more here and see which stocks made the list ->> David Moadel David Moadel is financial writer specializing in stocks, ETFs, options, precious metals, and Bitcoin. David has written well over 1,000 articles for leading online publications, helping investors understand markets, income strategies, and risk.His work has appeared in The Motley Fool, InvestorPlace, U.S. News & World Report, TipRanks, ValueWalk, Benzinga, Market Realist, TalkMarkets, Finmasters, 24/7 Wall St., and others.With a master's degree in education, David has taught at the elementary, high school, and college levels. That teaching background shapes his writing style: clear, educational, and practical. David has also built a loyal social-media audience by providing trustworthy financial content on YouTube, X/Twitter, and StockTwits.

Lumentum (LITE) more than doubled its revenue in fiscal Q4 2026 from a year earlier, and its shares have climbed 385.5% over the past year. The stock trades at 23.2 times sales, against 3.2 times for the S&P 500, and sits about 28% below its October 6 closing high. In each of five market shocks from 2022 to 2025, Lumentum fell at least 28% from peak to low, more than the index every time. It lost 39% in the 2022 inflation shock, when the S&P 500 fell 24%. Operating margin reached 28.0%, up from a slight loss a year earlier. Quarterly revenue rose from $534 million to $1.01 billion, but a $7.8 billion non-cash charge on convertible notes produced a $7.2 billion net loss. Management said tight component supply caps shipments below demand. It guided fiscal Q1 2027 revenue to $1.225 billion to $1.275 billion.

Lumentum shares rose 3% after StoneX started coverage with a Buy rating and a $1,200 price target. The firm says the company holds "critical scarcity points" in high-speed indium phosphide lasers and cloud transceivers. Lumentum's chief executive officer said this month that its parts are effectively sold out through early 2029. Analysts expect normalized earnings per share to climb from $8.67 in fiscal 2026 to $35.92 in fiscal 2028. The shares have slid from their $1,143 peak this month, and the chief financial officer sold $25.7 million of stock. The stock trades at 35x forward earnings, below its three-year average of 40x. Lumentum reports fiscal first-quarter results on November 5. It guided for revenue of $1.225 billion to $1.275 billion.