Report
No Data Yet
The Nasdaq Composite fell 0.7% at the open, while the S&P 500 slipped 0.3% and the Dow edged up 0.1%, as a rout in AI and chip stocks offset gains in energy shares. "The combination of spiking crude and a hot sector that's priced for perfection creates a natural trigger for profit-taking," said Michael Wilson, chief equity strategist at Morgan Stanley. "The question is whether this is a one-day shakeout or the start of a broader rotation." SK Hynix's US-listed shares plunged 9%, Micron Technology fell 5% and SanDisk dropped 6%, leading a broad semiconductor retreat. AMD and Intel each lost more than 4%, while optical networking names also slumped — Marvell Technology declined 5%, Corning fell 4% and Coherent shed 3%. The selloff extended to Asia earlier in the session, where Seoul's Kospi tumbled as much as 9%, with SK Hynix sinking 15% and Samsung Electronics losing 10%. The tech rout coincided with a 3.5% surge in Brent crude to $78.68 a barrel after Iran expanded military strikes to Gulf nations, raising fears over energy shipments through the Strait of Hormuz. Gold slid 1.5% to $4,060 as the oil spike revived expectations that central banks may need to keep interest rates elevated to combat inflationary pressures. **Oil Shock Rattles Rate Expectations** The renewed hostilities followed an Iranian attack on a commercial ship in the Strait of Hormuz early Sunday, with the Revolutionary Guards declaring the waterway "closed until further notice" — a threat the US Central Command countered by stating the strait remained open to lawful transit. The US military launched a fresh wave of strikes after several Gulf allies were targeted, marking the latest escalation in a conflict that has already reshaped global energy markets this year. "One can easily imagine the situation spiraling quite rapidly," said Fawad Razaqzada, a market analyst at Forex.com. "Of course, rhetoric can soften. We've seen that movie before. But for now, traders are forced to assume the worst." The oil spike complicates the outlook for the Federal Reserve, which has been navigating between sticky inflation and slowing growth. Higher crude prices feed directly into headline inflation measures, potentially delaying rate cuts that growth-oriented tech stocks have been pricing in. The US 10-year Treasury yield moved higher as traders adjusted expectations, though the exact level was not immediately available at the open. **Earnings Season Looms** The selloff comes at a critical juncture for the AI trade, with earnings season set to deliver reports from Taiwanese chip giant TSMC and Dutch equipment maker ASML this week. Wall Street banks including JPMorgan, Bank of America and Goldman Sachs are also scheduled to report, providing a broader read on the economy. IG analyst Fabien Yip said oil's return toward pre-war levels in June reflected markets pricing in a best-case outcome for the fragile US-Iran arrangement, and the "re-escalation exposes how fragile that assumption was." Near-term, she said, the risk premium should keep prices supported, though a repeat of the earlier spike appears unlikely given sluggish demand recovery and increased OPEC+ output. *This article is for informational purposes only and does not constitute investment advice.*
**Optical communication stocks fell more than 3% in US pre-market trading Monday, joining a broader selloff that erased billions from AI and semiconductor shares.** Coherent, Lumentum, Corning and Credo each fell more than 3% in pre-market trading, according to market data. The declines hit a sector that had been among the best performers this year, with Coherent shares more than doubling over the past 12 months on surging demand for optical transceivers — the fiber-optic components that connect GPUs in AI data centers. The selloff extended across the semiconductor complex. SK Hynix's US-listed shares sank 10.4%, while Micron Technology dropped 6.6%, according to pre-market data. Nvidia fell 2.16%, and storage makers SanDisk, Seagate Technology and Western Digital each lost more than 5%. Among chip equipment makers, Applied Materials fell 4.72% and Lam Research dropped 4.31%. CPO-related stocks — tied to co-packaged optics, a technology that integrates optical components directly with switch chips to reduce power consumption in AI data centers — also moved lower. Lumentum fell 4.24%, while Applied Optoelectronics dropped 4.01%, extending a pullback from recent highs. The pullback comes after a blistering rally in optical stocks this year. Coherent's datacenter and communications segment generated $1.36 billion in revenue last quarter, up 41% from a year earlier, driven by demand for 800G transceivers used in AI clusters. The company received a $2 billion investment from Nvidia tied to US manufacturing and was added to the S&P 500 in June. The optical component supply chain has been one of the tightest bottlenecks in AI infrastructure. Hyperscalers including Microsoft, Amazon and Google have been ordering 800G transceivers as fast as manufacturers can produce them, pushing contract manufacturers like Fabrinet to nearly double capital spending to $64 million last quarter to meet demand. The transition to 1.6T transceivers — the next generation of optical interconnects — is expected to accelerate through 2027, creating a multiyear tailwind for the sector. The competitive dynamics in the optical sector have shifted dramatically this year. Coherent has emerged as the dominant merchant supplier of high-speed transceivers, while smaller players like Applied Optoelectronics and Lumentum have carved out positions in specific segments. Credo Technology, which specializes in high-speed connectivity solutions, has benefited from the same demand wave. Monday's coordinated decline suggests the market is treating the sector as a single trade, making individual stock selection less relevant during broad risk-off moves. For investors, the question is whether the AI infrastructure trade is experiencing a healthy pullback or the beginning of a more sustained rotation. Optical component makers have been among the biggest beneficiaries of hyperscaler capital spending, with Coherent, Lumentum and Applied Optoelectronics each posting triple-digit percentage gains over the past year. Coherent trades at roughly 38 times forward earnings, a premium that reflects its leadership in the optical transceiver market but also leaves it vulnerable to sentiment shifts. Any sustained pullback in Nvidia's shares could ripple through the entire optical supply chain that depends on its GPU shipments, making Monday's pre-market action a key signal for investors watching the AI trade. This article is for informational purposes only and does not constitute investment advice.
**AI data center operators are hitting a bandwidth wall, and the fastest path over it runs through glass, not copper.** Coherent's datacenter segment surged 40.6% to $1.36 billion in the latest quarter, now 75% of total revenue, as hyperscalers race to replace copper interconnects with optical links that can handle 800G and 1.6T data rates. The shift is no longer speculative — it is showing up in earnings, capital expenditure, and supply agreements across the optical chip supply chain. "The pipe between GPUs is where the next leg of AI capex lands," Coherent management said on the earnings call, pointing to a $2 billion Nvidia investment tied to US manufacturing capacity. The company guided Q4 FY26 revenue to $1.91 billion to $2.05 billion, with non-GAAP operating margin expanding to 20.3% from 18.6% a year earlier. The data is visible across the stack. Fabrinet's capital expenditure nearly doubled to $63.8 million year-over-year, a signal that contract manufacturing capacity is filling ahead of schedule. POET Technologies expects to ship more than 30,000 optical engines in 2026, backed by $430 million in cash after raising about $375 million gross. nLIGHT posted a 160.7% EPS beat on revenue up 55.2%, with defense product revenue nearly doubling to a record $33.1 million. IPG Photonics, the fiber laser incumbent many investors wrote off, saw emerging growth products reach 53% of revenue as it redeploys its laser stack into datacenter photonics roadmaps. The optical interconnect market is emerging as one of the most strategically important segments in AI infrastructure. Nvidia has committed roughly $4 billion across component makers Coherent and Lumentum to lock up supply, while Elon Musk received FTC clearance to acquire Mesh Optical Technologies, a startup founded by former SpaceX engineers that develops 800G and 1.6T optical transceivers drawing about a third of the power of competing modules. Japan's NTT established the $500 million IOWN Fund to accelerate the global transition from copper to light-based AI clusters. The spending wave has not crested. ## Why Copper Is Hitting Its Limits The technical bottleneck is straightforward. Per-lane signaling in copper interconnects is climbing toward 200 gigabits per second, but attenuation, crosstalk, and the skin effect worsen at higher frequencies, making passive copper impractical beyond a meter or two. Optical links solve this by converting electrical signals into light for transmission over fiber, carrying far more data over longer distances while consuming less power. This physics problem is driving a structural shift in how AI clusters are built. Training and inference tasks on frontier models are split across tens of thousands of GPUs using parallel-computing techniques, requiring processors to exchange enormous volumes of data every fraction of a second. The industry calls this mismatch the "I/O wall" — per-chip compute has raced ahead, but the bandwidth linking those chips has not kept pace. Chipmakers and networking vendors are racing to deliver faster 800G and 1.6T optical transceivers while shortening electrical paths with co-packaged optics, which place the optical engine alongside the switch ASIC. Tower Semiconductor said it has shipped more than five million coherent photonic integrated circuits to Marvell Technology for use in optical transceivers that link data centers. The technology must precisely control both the phase and polarization of light, making these chips harder to build than simpler semiconductor types. ## The Stack Trade The AI datacenter bandwidth story is not a single-name trade. It spans five layers: interposer engines (POET Technologies), merchant transceivers (Coherent), contract manufacturing (Fabrinet), fiber laser reinvention (IPG Photonics), and the defense-plus-datacenter wild card (nLIGHT). Each occupies a different position in the optical supply chain, and each offers a different risk-reward profile. Coherent, now an S&P 500 component, trades at roughly 38 times forward earnings — the premium for leadership in a market where Nvidia is a customer, not a competitor. Fabrinet has pulled back nearly 19% in the past month despite its capex signal, with the average analyst price target at $749.11. POET, the smallest name on the list, is up 16% year to date after a 24% monthly pullback, with $430 million in cash funding its production ramp. nLIGHT is up 87.8% year to date, and its datacenter angle remains an option the market has not yet priced in. For investors, the question is which layer of the stack offers the best entry. Coherent's segment growth, Fabrinet's capex doubling, and nLIGHT's triple-digit EPS surprise all point at the same underlying reality: the pipe between GPUs is where the next leg of AI capital expenditure lands, and the window to position ahead of the next round of hyperscaler announcements is narrower than the recent pullbacks suggest. This article is for informational purposes only and does not constitute investment advice.
Coherent reported a 163-basis-point expansion in adjusted operating margin during Q3 fiscal 2026, driven by AI demand for optical networking products. Higher factory utilization and improved supply chain efficiencies drove the margin gain as production volumes increased, the company said. Fixed manufacturing costs were spread across more units, allowing incremental revenue to flow through to earnings at a faster rate. Adjusted net income rose nearly 56% from a year earlier. The Datacenter & Communications segment, which generated 75% of Q3 revenue, grew 41% year over year. Coherent invested about $290 million in capital expenditures during the quarter, more than double the prior-year period, to support rising demand. The company's backlog now extends into calendar 2028, with long-term supply agreements through 2030. NVIDIA's $2 billion strategic investment boosted Coherent's cash balance to about $3 billion from $1.5 billion in the prior quarter. Management repaid $162 million of debt, reducing the leverage ratio to 0.5 times from 1.7 times. Coherent shares have rallied 247% over the past year but pulled back 11% in the past month. The stock trades at about 37.6 times forward earnings, nearly double the industry average of 21.5 times. The Zacks Consensus Estimate projects fiscal 2026 revenue of $7.1 billion, implying 21.5% year-over-year growth, with fiscal 2027 revenue expected to rise another 37.7%. The consensus estimate for fiscal 2026 earnings per share is $5.47, representing 55% growth, with a further 52.5% increase expected in fiscal 2027. Among peers, Lumentum Holdings and IPG Photonics operate in the same optical components market, though Coherent's AI infrastructure exposure, record backlog and strengthened balance sheet differentiate its growth profile. The company's multi-year customer commitments and long-term supply agreements provide greater earnings visibility than typical hardware manufacturers. NVIDIA's investment serves as a strategic endorsement of Coherent's technology and its role in the AI infrastructure ecosystem. The strengthened balance sheet gives management greater financial flexibility to invest in capacity expansion and pursue growth opportunities without relying on additional debt. The margin expansion shows that Coherent's manufacturing network is becoming more efficient as AI-driven demand strengthens. The improved operating leverage, combined with a stronger balance sheet and record backlog, supports the case that Coherent is transitioning from a cyclical hardware supplier to a more predictable growth company tied to AI infrastructure spending. Investors will watch the next quarterly report for continued margin improvement and updated guidance on capacity expansion. This article is for informational purposes only and does not constitute investment advice.
**Semiconductor stocks surged Thursday, tracking an 8.8% rally in Chinese chip shares fueled by Changxin Memory Technologies' $4.34 billion Shanghai IPO plans.** US chipmakers rebounded sharply in premarket trading, recovering some of the ground lost after Samsung Electronics' forecast-beating results triggered a sector-wide selloff earlier this week. Micron Technology, Intel, Coherent and Marvell Technology each climbed more than 3% by 5:41 a.m. ET, while Applied Materials rose 3.8% and Advanced Micro Devices gained 2.2%. "The China semiconductor rally is providing a much-needed bid after the Samsung profit-taking shook confidence," said Rachel Kim, semiconductor analyst at Edgen. "Changxin's IPO is a reminder that memory demand remains structurally strong, even if near-term positioning got overextended." The CSI Semiconductor Index closed up 8.8% after Changxin Memory Technologies, the world's fourth-largest DRAM maker with about 7.7% global market share, said it would begin book-building July 15 for a Shanghai IPO aiming to raise 29.5 billion yuan, or roughly $4.34 billion. The move reignited enthusiasm for chip stocks across Asia and spilled into US premarket trading, with South Korea's Kospi closing 0.6% higher as SK Hynix rose 5.3% and Samsung gained 0.8%. The rebound comes just two days after a brutal selloff sparked by Samsung's preliminary second-quarter results. The South Korean giant reported operating profit of 89.4 trillion won ($58.44 billion) — nearly 19 times higher than a year earlier and exceeding the LSEG SmartEstimate of 87.3 trillion won. Revenue jumped 129% to 171 trillion won. Yet Samsung shares fell sharply as investors locked in profits following the stock's red-hot rally, raising broader questions about whether the artificial-intelligence-driven demand that has powered the chip sector's surge can sustain elevated pricing. **The Memory Price Question** Memory chip prices have risen sharply over the past year, and the Samsung selloff highlighted growing investor anxiety about demand durability. The PHLX semiconductor index remains down about 15% from its record high in late June, while Micron has dropped more than 20% since hitting its own peak on June 25. Despite the pullback, the index is still up roughly 75% year-to-date, and Micron has more than doubled. The so-called hyperscalers — Microsoft, Meta Platforms and Alphabet — are under increasing scrutiny as earnings season approaches. Their capital expenditure plans for AI infrastructure directly determine revenue visibility for chipmakers. A slowdown in spending growth could pressure the lofty valuations that semiconductor stocks command. Intel, which reports second-quarter results on July 23, guided for non-GAAP earnings per share of $0.20 on revenue of $14.3 billion at the midpoint — an 11% year-over-year increase and a sharp turnaround from the $0.10 per-share loss it posted a year earlier. Analysts expect full-year 2026 EPS of $1.09, a 161% surge from 2025. **What's at Stake for Investors** The semiconductor sector has added nearly half of the S&P 500's market value gains this year, according to JonesTrading data. But the speed of the rally has fueled debate about sustainability. Intel trades at 904 times trailing earnings, though its forward multiple of 137 reflects expectations of a dramatic earnings recovery. On Stocktwits, retail sentiment was neutral on Micron and the Roundhill Memory ETF, while bearish on Intel and AMD — a cautious posture ahead of earnings. The key question for the weeks ahead is whether the China-driven rebound has legs or represents a dead-cat bounce before another leg lower. Changxin's IPO will test investor appetite for memory exposure at a moment when the sector's valuation has rarely been higher. If the offering prices successfully, it could validate the bull case that AI-driven memory demand has further to run. If it stumbles, the selloff that began with Samsung may not be over. This article is for informational purposes only and does not constitute investment advice.
**Atreides Management CIO Gavin Baker argues the memory shortage powering AI hardware gains is structurally different from past semiconductor cycles — and far from over.** The memory shortage driving triple-digit gains in Micron Technology Inc. and SK Hynix Inc. this year is structurally different from past semiconductor cycles, according to Atreides Management CIO Gavin Baker, who sees four reasons the crunch will persist. "This cycle is different because the supply side is disciplined in a way it has never been before," Baker said during a recent appearance on the All-In Podcast. Baker, whose $7 billion hedge fund was early on Nvidia Corp., Astera Labs Inc. and Coherent Corp., pointed to a hardware bottleneck as consumer devices from Apple Inc. lack the dynamic random-access memory needed to run AI models locally. He also highlighted that Taiwan Semiconductor Manufacturing Co. is keeping its capacity constrained, preventing the oversupply glut that typically crashes memory prices. The thesis carries significant weight for investors. Baker's memory-focused positions in SK Hynix, SanDisk Corp. and Micron have delivered triple-digit returns in 2026 alone, and Micron's most recent quarter showed revenue surging 345% year over year — far exceeding Wall Street EPS expectations. ## Why This Cycle Breaks the Pattern Historically, memory stocks at current valuations would signal a sell. The semiconductor industry's boom-bust pattern has punished late-cycle buyers repeatedly as new fabrication capacity comes online and floods the market with supply. But Baker draws a sharp contrast: TSMC's capacity discipline means the usual oversupply that crashes DRAM prices does not exist today. The shift reflects a broader structural change in AI infrastructure demand. Apple's need for more DRAM in its devices to support on-device AI processing represents a new demand vector absent in prior cycles. As consumer hardware requires more memory capacity, companies like Micron and SK Hynix benefit from both data center and consumer demand tailwinds — a dual-engine growth profile the memory industry has never experienced simultaneously. ## The Investment Implications For investors, Baker's thesis suggests the memory trade still has room to run. Atreides Management's 13F filing from late 2025 showed increased positions across memory names — a bet that has already paid off with triple-digit percentage gains. With Micron delivering 345% revenue growth and blowing past consensus estimates, the question is whether the market has fully priced in the structural shift Baker describes. The broader AI hardware supply chain is also affected. Nvidia, whose GPUs require high-bandwidth memory (HBM) from the same constrained suppliers, depends on this delicate balance. Any disruption in memory availability could ripple through the entire AI infrastructure stack, from data center operators to cloud providers. For investors tracking the AI trade, Baker's thesis provides a framework for evaluating whether memory names — currently at elevated valuations by historical standards — deserve a structural premium. This article is for informational purposes only and does not constitute investment advice.
**Applied Optoelectronics, Coherent and Lumentum shed a combined $12 billion in market value Thursday as a valuation-driven selloff swept through the AI optical-networking complex, interrupting one of the year's hottest trades.** Shares of high-flying photonics names slid sharply at midday with no company-specific catalyst. Applied Optoelectronics (AAOI) tumbled 17% to $114.93, its steepest single-session drop of 2026. Coherent (COHR) fell 10% to $331.57, while Lumentum (LITE) declined 10% to $720.91. "The market is repricing the risk premium on these names after they ran up 80% to 233% year to date," said Rachel Kim, semiconductor analyst at Edgen. "The fundamentals haven't changed, but at 158 times earnings for Coherent and 128 times for Lumentum, there was almost no margin for error built into the stock prices." The selloff extended beyond pure photonics plays. Nvidia (NVDA) slipped 2% and Intel (INTC) dropped 6%, while inverse semiconductor ETFs surged — a signal that defensive positioning swept across the AI-hardware complex heading into July. The VanEck Semiconductor ETF (SMH) fell alongside the group, though the CBOE Volatility Index held at 16.88, suggesting the move was sector-specific rather than a broad market panic. **The fundamentals that drove the rally remain intact.** Coherent's fiscal third-quarter revenue rose 21% year over year to $1.8 billion, with datacenter and communications revenue jumping 41% as the company deepened its optical-networking partnership with Nvidia. Analysts maintain an average price target of $384 on Coherent, with 12 Buy and 4 Strong Buy ratings against 4 Holds. Lumentum posted even sharper growth, with Q3 revenue surging 90% to $808 million. Management guided Q4 revenue to a range of $960 million to $1.01 billion, and the company disclosed a co-packaged optics order for first-half 2027 delivery alongside an optical-circuit-switch backlog exceeding $400 million — signaling continued design-in traction with hyperscale AI customers. Applied Optoelectronics, the smallest of the three, is scaling fast on 800-gigabit transceiver demand tied to a large hyperscale customer. Datacenter revenue more than doubled year over year in the first quarter, and Chief Executive Officer Thompson Lin has guided full-year 2026 revenue to potentially exceed $1 billion. The company remains unprofitable, with trailing earnings per share of negative 65 cents. **The bull-bear split on the optical trade is widening.** One camp views the pullback as a tactical entry into a multi-year AI-scaling cycle, citing hyperscaler capital expenditure on 800-gigabit and 1.6-terabit transceivers, co-packaged optics and optical circuit switches. The other camp flags stretched multiples and points to insider selling at all three companies in May and June — though those dispositions appear consistent with pre-scheduled Rule 10b5-1 plans and equity-compensation timing rather than directional bets against the businesses. The next catalyst path is calendar-driven. Coherent and Lumentum will report fiscal fourth-quarter results later this summer, and hyperscaler capex commentary from mega-cap tech earnings arrives within weeks. For investors weighing photonics exposure, the key question is whether Thursday's selloff represents a healthy reset in an intact growth story or the beginning of a broader de-rating for a sector that had priced in perfection. This article is for informational purposes only and does not constitute investment advice.
**A two-day surge in optical connectivity stocks gave way to profit-taking Wednesday as Michael Burry's new short bets against the AI sector weighed on sentiment.** Optical communication stocks fell in pre-market trading Wednesday, with Corning Inc. sliding more than 3%, as a blistering rally fueled by AI data center deals gave way to profit-taking. Coherent Corp. dropped over 3%, while Credo Technology Group and Lumentum Holdings each fell more than 2%. "Increasing investments in AI data centers are driving a major expansion in optical markets," Morgan Stanley analysts wrote in a note Monday, projecting the market could grow from roughly $30 billion in 2025 to more than $65 billion by 2028. The firm raised its price target on Corning to $127 from $103. Corning had surged 15.7% Monday after announcing a $6 billion supply deal with Meta Platforms Inc. and jumped another 18% Tuesday on a partnership with Nvidia Corp. that included warrants to purchase up to 15 million shares at $180 apiece. The stock is up more than 85% year to date and has more than tripled over the past 12 months. Mizuho raised its target to $145 from $120 with an outperform rating, while Morgan Stanley maintained an equal-weight rating. The pullback comes as the broader semiconductor sector faces headwinds from Michael Burry's new bearish bets, disclosed Tuesday in a Substack post. Burry said he shorted Tesla Inc. at $416.22 and established new short positions against Nvidia, Applied Materials Inc. and the iShares Semiconductor ETF. Micron Technology fell over 2% and SanDisk dropped nearly 4% in pre-market trading, reflecting the broader sector weakness. **Optical Connectivity Becomes AI's Bottleneck** The selloff follows a period of extraordinary demand for optical components, which hyperscalers need to link thousands of Nvidia GPUs within AI data centers. Corning said it would boost U.S. fiber production capacity by more than 50% and build three new manufacturing facilities in North Carolina and Texas, creating 3,000 jobs. The company's Q4 net sales rose 20% to $4.22 billion, with earnings per share jumping 72% to $0.62. Nokia's optical networking business also saw explosive growth from AI data center buildout, the company said in its recent earnings report, leading it to increase investments in the business. The optical market's expansion is being driven by the limits of legacy network infrastructure, which is approaching capacity constraints, according to Morgan Stanley. **What the Short Bets Mean for the Sector** Burry's new short positions target the heart of the AI trade — Nvidia, semiconductor equipment maker Applied Materials, and the broad SOXX ETF — suggesting he sees valuation excess in a sector that has powered much of the market's gains. Optical stocks, which have ridden the same wave, are now caught in the downdraft. For investors, the question is whether this is a temporary pullback in a secular growth story or the beginning of a broader correction. Optical connectivity demand is tied directly to AI CapEx, which remains elevated: SoftBank completed a $10 billion follow-on investment in OpenAI on July 1, and Japan committed 387.3 billion yen in AI subsidies through its Noetra initiative. But with Corning trading near all-time highs after a 63% first-half rally, some profit-taking was inevitable. This article is for informational purposes only and does not constitute investment advice.
Shares of Applied Optoelectronics tumbled 13% to $149, Coherent fell 9% to $387 and Lumentum slid 8% to $825 at midday Tuesday, as a South Korean tech rout rippled through AI-linked optics suppliers already trading at extreme valuations. "The optics complex has been pricing in perfect execution on hyperscaler AI spending, and any wobble in the macro tape hits these names hardest because there is almost no valuation cushion," said Rachel Kim, semiconductor supply chain analyst at Edgen. The selloff tracked a 6% decline in the VanEck Semiconductor ETF and a 3% drop in Nvidia, after South Korea's KOSPI fell 10% and SK Hynix overtook Samsung as the country's most valuable company. The CBOE Volatility Index sat at 17.28, suggesting the move was sector-specific rather than broad market panic. Coherent trades at 189 times trailing earnings and Lumentum at 146 times, while Applied Optoelectronics remains unprofitable — leaving almost no margin for error if AI capex sentiment shifts. The three stocks have posted extraordinary year-to-date gains — Applied Optoelectronics up 336%, Lumentum up 126% and Coherent up 113% — fueled by 800-gigabit transceiver demand and hyperscaler buildout commitments. Tuesday's drawdown does not confirm a valuation top, but it tests whether the group can hold near prior breakout levels. A weak close would extend the debate over whether the optics trade has grown too crowded. ## The Korean Trigger and the Valuation Gap The immediate trigger was not company-specific. South Korea's semiconductor-heavy KOSPI dropped 10% as export controls on indium — a critical input for optical chips — tightened. China accounts for close to 70% of global indium output and added indium phosphide to its export control list in February 2025, according to Reuters. That supply-chain risk compounds the valuation pressure on optics makers that depend on indium phosphide wafers for high-speed lasers and transceivers. Coherent's recent fundamentals have been strong. The company reported fiscal third-quarter revenue of $1.81 billion, up 21% year over year, with its datacenter and communications segment growing more than 40%. Lumentum's most recent quarter showed revenue up 90% year over year. Applied Optoelectronics posted $151 million in revenue, up 51%, though that figure missed consensus estimates. Yet the multiples tell a different story. Coherent's NTM enterprise value-to-EBITDA of 38 times runs well above peers such as Corning at 34 times and Fabrinet at 32 times, and well past the peer median of 21 times, per TIKR data. Lumentum's consensus analyst target sits near $1,111, while Coherent's average target of about $385 sits below its current trading price — a rare signal that the market is pricing in a future Wall Street models have not caught up to. ## What Investors Can Watch Next The key test comes in the next few sessions. If Applied Optoelectronics, Coherent and Lumentum stabilize near prior breakout levels, Tuesday's selling may prove exhausted. A continued slide would suggest the group's triple-digit year-to-date gains have made it vulnerable to any shift in AI infrastructure sentiment. Coherent's fiscal fourth-quarter results, due in August, will be the next major event. Management guided revenue of $1.91 billion to $2.05 billion and earnings per share of $1.52 to $1.72, both implying acceleration from the third quarter. A print at the high end with gross margin pushing toward 41% would signal that the company's 6-inch indium phosphide wafer ramp is converting to profit. A guide-down or margin stall would hit a stock trading at more than 57 times forward earnings with little cushion. For investors, the optics trade remains one of the highest-conviction corners of the AI infrastructure theme, but Tuesday's selloff is a reminder that conviction has a price. At these multiples, the group can no longer absorb bad news — it can only absorb perfect execution. This article is for informational purposes only and does not constitute investment advice.
Coherent Corp. received a $50 million CHIPS Act commitment to expand its indium phosphide semiconductor plant in Sherman, Texas, quadrupling wafer capacity to meet AI-driven demand for optical networking components. "Semiconductor photonic devices are essential building blocks of AI infrastructure, enabling the high-speed connectivity required to move unprecedented amounts of data between processors, memory, and systems," Jim Anderson, chief executive officer of Coherent, said. The expansion will double the facility's manufacturing space and add advanced wafer fabrication equipment and cleanroom capacity. At completion, the Sherman site is expected to create more than 1,000 jobs, including more than 550 direct roles in advanced manufacturing, engineering, and technical positions. The CHIPS award builds on roughly $20 million in prior support from the Texas Semiconductor Innovation Fund and the Sherman Economic Development Corporation. The investment strengthens Coherent's position as the world's first high-volume producer of 6-inch InP wafers, a specialized material critical for optical interconnects that move data between GPUs in AI data centers. With NVIDIA as a partner of more than two decades, the expansion positions Coherent to capture a growing share of the optical networking market as AI clusters scale from thousands to millions of interconnected processors. The Sherman facility is home to the world's first and largest volume-production 6-inch InP manufacturing platform. Indium phosphide — a III-V compound semiconductor with superior electron mobility and direct bandgap properties — enables the high-speed photonic devices that convert electrical signals to optical ones and back, forming the physical layer underpinning every AI data center's internal network. Coherent and NVIDIA have collaborated for more than two decades, with the partnership deepening as AI workloads have scaled. "AI factories are the infrastructure of the new industrial revolution. Connecting millions of GPUs into one thinking machine requires optical technology built for scale, speed, and energy efficiency," Jensen Huang, founder and CEO of NVIDIA, said. The companies are jointly pursuing a $2 billion AI infrastructure upgrade, according to the Associated Press. The CHIPS Act funding comes as the U.S. seeks to reduce reliance on Asian semiconductor manufacturing for strategically important technologies. Bill Frauenhofer, executive director for semiconductor investment and innovation at the Department of Commerce, said the incentives would "expand production capability, strengthen the U.S. semiconductor supply chain, and accelerate the next generation of critical optical technologies." The expansion also comes as hyperscale cloud providers — Amazon Web Services, Microsoft Azure, and Google Cloud — race to build out AI data center capacity, driving demand for high-bandwidth optical interconnects. Coherent's InP-based photonic devices are used in the transceivers and optical engines that link GPU clusters, a market that research firm LightCounting estimates will exceed $20 billion annually by 2028. For investors, the expansion shows that Coherent is betting on the optical networking layer of AI infrastructure — a segment historically overshadowed by GPU makers like Nvidia and memory suppliers like SK Hynix. Coherent shares trade as a direct play on the photonics supply chain, competing with Lumentum in the high-speed optical component market. The CHIPS backing provides non-dilutive capital that reduces the cost of the expansion, potentially improving returns on invested capital as the Sherman facility ramps production. This article is for informational purposes only and does not constitute investment advice.