Silicon Valley’s Latest Obsession Shifts to Light as Optical Supercycle Emerges
Copper cables have reached their limits, and Wall Street is betting on a light-speed replacement. As AI models demand ever-faster data transfer, optical interconnects are emerging as the missing piece in AI infrastructure. Nvidia committed $2B each to Lumentum and Coherent in multiyear deals, securing scarce advanced laser supply.
- Analysts are also focusing on other key optical-networking players, including Applied Optoelectronics, Fabrinet, Ciena, and Cisco Systems.
- Applied Optoelectronics is up 220% year-to-date, while Lumentum’s laser capacity is already sold out through fiscal 2027 and possibly 2028.
Light at the end of the tunnel: Bank of America analyst Tal Liani expects the optical transport market to grow ~10% annually through 2027, driven by an AI “supercycle.” Rosenblatt analyst Mike Genovese echoed that optimism, raising price targets to $900 for Lumentum (from $580) and $375 for Coherent (from $300), implying more than 50% upside. In the era of massive AI clusters, the real edge may belong to whoever can move the data fastest.
