Alex A.C.
Value/GARP Investor, Semiconductor & Financial Analysis, Electronics MEng
Lumentum and Coherent, InP laser makers at very high valuations, can underperform if newer technologies win short-reach scale-up links. Scale-out and scale-across look safe for InP, but disruption in scale-up and scale-in looks here to stay. Per @PhotonCap, Teradyne now groups microLED with silicon photonics and co-packaged optics as a scale-up interconnect, and Lumentum, Qualcomm and Corning will demo VCSEL die-to-die optics. Mature VCSELs raise the question of VCSEL co-packaged optics. x.com x.com x.com
Wafer-tested VCSEL arrays could erode Lumentum's laser scarcity premium if scale-up links adopt wide, parallel designs. Lumentum's in-rack demo used arrays but does not replace every high-power laser; Credo and ams OSRAM seek approval for a parallel-link standard in 2027. Multiple suppliers would pressure pricing power and margins. Near-term earnings could still benefit from laser shortages, with Lumentum sold out through early 2029. x.com
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.com
Lumentum, the largest indium phosphide laser maker and supplier of the ultra-high-power laser in NVIDIA's Spectrum-X CPO switch, has a lot to gain from the silicon photonics roadmap. Its indium phosphide is sold out for years, which explains why its SEMICON Taiwan talk promoted gallium arsenide VCSELs for scale-up, rating them strong on 5 of 7 axes. VCSELs are its only incremental revenue in that period, even though they could displace its InP business. x.com x.com
Co-packaged optics standards could make finished transceiver modules smaller and more interchangeable as chip designers build optical engines inside their packages. That is another reason to avoid Lumentum, Coherent and Applied Optoelectronics and prefer Soitec. Lumentum and Coherent now earn a lot from finished modules, leaving them exposed if the architecture changes. x.com
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.com
Tighter Lumentum laser allocations would strengthen Coherent's pricing power if Marvell's rumored acquisition leads it to prioritize Nvidia and its own modules. Other buyers would face tighter supply, and hyperscalers would push harder to second-source lasers from Coherent. x.com
Applied Optoelectronics has a better chance than Coherent of delivering a 300-400 mW laser with tolerable RIN and linewidth. Its transceiver capacity ramp is also larger and is not gated by Sumitomo's 6-inch InP wafers. Long AAOI against short COHR is an unnecessarily dangerous pair trade idea. x.com
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.com
Lumentum is the only volume supplier of EML lasers for 1.6T optics, capacity is sold out, and indium phosphide fabs do not scale overnight. Qualcomm and Corning partnered with it on 1,060nm VCSEL chip-to-chip links targeting about 10 Tb/s. Revenue grew 109% and it trades at 30.6x forward earnings with $1.07B of net cash; a one-time $7.8B non-cash convert charge hid profitable operations. Risks are convert dilution and Coherent and Broadcom adding InP lasers before the shortage eases. x.com
Optical transceiver demand exceeds supply, and 1.6T lifts revenue per module for suppliers able to qualify capacity. Applied Optoelectronics raised at least $1.62B through 2026 ATMs; its last reported monthly capacity was 200,000 modules versus a year-end target above 650,000. Credo expects over $600M in FY2027 revenue across optical DSPs, PICs and modules, not modules alone. Shipments, yields and margins must prove out. Lumentum and Coherent already price in much expected growth. x.com