Marcos Milla
Former Analyst at the Federal Reserve, ETF/Stock Newsletter Author
The Tema Photonics & Optical ETF is the best way to own photonics, better than EUV and FOTO, as the only truly actively managed, institutional-quality photonics ETF. Its top holdings are Lumentum, AXT and Aixtron, and Tema partnered with SemiAnalysis to deliver pure-play exposure to leading-edge photonics and optics, a critical path in the AI buildout. Wall Street analysts see a $60 price target, 50% upside over 12 months. x.comÂ
Defiance's photonics ETF is a good tracker for photonics because it covers the whole supply chain, from indium phosphide to equipment, lasers and modules. Its top holdings fit: Lumentum is the best InP laser maker, AXT benefits as the InP shortage worsens, and Aixtron makes the MOCVD machines that produce lasers. Recent earnings showed the sector sold out, with long-term agreements removing cyclicality. Rival ETFs focus too narrowly on transceivers, so this suits a set-and-forget approach. x.com … Show more
LYTE, a newly launched photonics ETF, is worth owning as a more targeted photonics play than the EUV ETF. Its top holdings are Sivers Semiconductors, Applied Optoelectronics, Lumentum and Coherent. x.comÂ
The Tema Photonics & Optical ETF is hard to beat as a way to invest in photonics, whose AI data-movement market Goldman Sachs forecasts will grow about 9x between 2026 and 2028. The actively managed fund is run in research partnership with SemiAnalysis, with top holdings including Lumentum, Aixtron, AXT, Applied Optoelectronics, Furukawa Electric, Zhongji Innolight, Tower Semiconductor, Aehr Test Systems and Sivers Semiconductors. x.comÂ
Tema Photonics & Optical ETF offers a way to hold a range of optical companies without trading the volatile individual names. Its roughly 9% exposure to an Anthropic SPV adds to the appeal. The ETF is thinly traded; the idea is to buy and hold for a year rather than keep trading. x.com x.comÂ
Marvell risks paying a peak-scarcity price for Lumentum if optical supply catches up by 2028-30. The proposed ~$99B deal values Lumentum at roughly 20x guided annualized revenue and 58x estimated after-tax operating income, while Lumentum, Coherent and Chinese suppliers are adding laser capacity. The DSP-and-laser combination has strategic logic, but durable scarcity economics and Nvidia's response remain uncertain. x.comÂ
Rising 1.6T switching demand favors optical suppliers, though their execution risks vary. Bank of America says the market could grow ~101% annually through 2030. Marvell's leading DSPs and Lumentum's supply-short 200G EML lasers are lowest risk; Applied Optoelectronics' capacity expansion and Fabrinet's customer concentration make them medium risk. Aeluma remains pre-commercial, while Lightwave Logic's polymer modulators are a high-risk moonshot despite its TSM partnership. x.comÂ
Optics and photonics should be among AI's biggest winners as faster GPU networks need optical connections that suppliers cannot expand quickly enough. Lumentum says some components are sold out through early 2029; Sivers is investing $30M to target more than 100M lasers a year, with operations expected in Q4 2027. Potential US restrictions on Chinese transceivers could reshape supply in 2027. Applied Optoelectronics and Sivers are the favorites. x.com x.comÂ
Lumentum's 109% year-on-year growth and sold-out capacity through 2029 make selling its AI optics exposure questionable. Bloomberg reported Marvell is in advanced talks to buy it; the appeal depends on the price, especially when holders of an $80 billion Lumentum would become holders of a $320 billion-plus Marvell growing 37%. x.comÂ
Owning Lumentum's laser fab could secure Marvell's FY28 supply and hedge its DSP franchise as optical links shift to CPO. The rumored deal's strategy makes sense, but short-term pain is likely: at a 30% premium, roughly $17.5B in new debt and the rest in stock, rough math puts EPS dilution near 15%. It turns accretive only if Lumentum outgrows Marvell at today's guided rates for five or six more quarters, which looks achievable while the laser shortage lasts. x.com x.com x.comÂ
Lumentum is a great business, but at $954 its risk/reward is not attractive. Applying 30x to fiscal 2028 non-GAAP EPS of $40 gives a 2027 price target of $1,200, about 26% upside, or roughly 15% after adjusting for execution, financial, technology and supply risks. Reaching it needs on-time manufacturing ramps, sustained pricing power and cash flow without excessive dilution. Lost pricing power plus slipping OCS or laser ramps would break the thesis; a significant dip would offer a better entry. … Show more
