Key Points
Lumentum and Coherent make advanced optics technologies critical to AI networks.
Right now, there's a shortage of the laser components that these companies make.
Despite these stocks' strong gains recently, investors would do well to take a closer look.
Shares of optics technology companies Lumentum Holdings(NASDAQ: LITE) and Coherent(NYSE: COHR) soared this past Monday. Lumentum rose 12% during the trading session, while Coherent climbed more than 15%. What's going on with these two companies? And should investors consider investing in them?
This past Monday morning, artificial intelligence (AI) chip manufacturing giant Nvidia announced plans to invest $2 billion in each of the two companies.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Nvidia said that its deal with Lumentum is a multi-year strategic agreement to accelerate innovation in advanced optics technologies. It includes access rights to the company's advanced laser components. These are critical for scaling AI factories and improving the energy efficiency and resiliency of large-scale AI networks and data centers, according to the press release.
Image source: Getty Images.
Nvidia said that the agreement with Coherent is a purchase commitment with future access and capacity rights for advanced laser and optical networking products. The optical interconnects and advanced package integration that Coherent provides are foundational to the next phase of AI infrastructure because they can unlock ultra-high-bandwidth, energy-efficient connectivity across AI factories.
Most of the money Nvidia is investing in the two companies is slotted for advanced research and development of their optics technologies. The two deals are part of Nvidia's ongoing strategy of building an ecosystem to support AI systems.
There's a shortage of the lasers the two companies make
Both Lumentum and Coherent build indium phosphide (InP) lasers that can achieve advanced bandwidth connections and super-fast data transmission. Analysts say there's a huge imbalance between demand for the high-tech laser systems and supply.
Research firm TrendForce forecasts that worldwide shipments of optical transceivers like those produced by Lumentum and Coherent will grow 2.6 times this year over the 24 million units that were estimated to ship last year. The surge in demand for the lasers is already causing a "significant upstream bottleneck in laser light sources," according to the report. Nvidia is buying up the lion's share of the advanced laser systems.
The share prices of both optics stocks receded a bit on Tuesday, as the entire market was rocked by the ongoing and escalating war in the Middle East, with the S&P 500 index down 2% in late morning trading.
Still, both stocks are up significantly for the year so far. Coherent has climbed 54% year to date, and Lumentum has nearly doubled, soaring 92% since the beginning of 2026. If Nvidia is pumping money into the two companies, mainly for research and development, both stocks are absolutely worth a look despite already robust gains this year.
Should you buy stock in Lumentum right now?
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Matthew Benjamin has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Coherent, Lumentum, and Nvidia. The Motley Fool has a disclosure policy.
