Photonics Emerging as Key Player in AI Investments
Photonics, the science of generating and manipulating light, is becoming a vital pick-and-shovel investment opportunity amid the escalating demands of artificial intelligence (AI) computing. The sector is currently facing significant bottlenecks in network and communication speeds, which traditional copper wiring cannot accommodate. Companies like Coherent (COHR), Lumentum (LITE), and Applied Optoelectronics (AAOI) are positioned to address these issues by producing technologies necessary to optimize AI networks.
Recent data indicates that capital expenditure (CAPEX) in the AI sector is on the rise, with major hyperscalers such as Microsoft, Alphabet, and Amazon expected to increase their spending from $390 billion in 2025 to $729 billion by 2027. Lumentum specifically reported a remarkable revenue growth of 65% and a staggering earnings-per-share (EPS) growth of 298% year-over-year, with expectations for continued robust growth through 2027.
NVIDIA recently announced a $2 billion investment in both Lumentum and Coherent, highlighting the critical role of photonics in the growing AI ecosystem. Stocks in the photonics industry have shown impressive growth, with Lumentum gaining 529%, LITE up 1,152%, and AAOI surging 3,433% over the past three years, signaling strong momentum within the sector.
