Key Points
Nvidia (NASDAQ: NVDA) has invested $2 billion in Coherent (NYSE: COHR) as part of a strategic move to enhance its capabilities in the growing AI market. This investment was announced in early March 2023 and has contributed to a 30% increase in Coherent’s stock since the announcement.
Coherent experienced a 23% revenue growth in fiscal 2025 and is projected to grow at a CAGR of 31% from fiscal 2025 to fiscal 2028. The company’s optical business, which focuses on products like ultra-fast optical transceivers, is driving much of this growth, supported by a recent $50 million grant under the CHIPS and Science Act to expand its operations in Sherman, Texas.
Despite a premium valuation of 65 times next year’s earnings, Coherent’s transformation into a high-growth AI play could justify the increased valuation. Analysts also anticipate the company’s earnings per share to turn positive by fiscal 2026, growing at a 52% CAGR over the next two years.
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