SasoEquity
AI & Robotics Investor
Lumentum and Coherent face a threat from microLED optics, which could replace laser optics with 20x less power and no temperature sensitivity by late 2027. The use case is short-reach, high-volume links under 30 meters. The copper versus optics debate is a distraction, since every AI cluster needs both and Credo now does both while Applied Optoelectronics handles long-haul; the bigger question is what microLED does to laser makers. x.com x.comÂ
Ciena's quarter confirms AI spending is cascading from GPUs to networking, optical components and fiber, and the whole optical chain is supply-constrained, repricing margins and growth. Coherent and Lumentum are today's bottleneck, with Ciena citing pump lasers and CDMs. Sivers is a bet on the next one, external light sources for co-packaged optics. Applied Optoelectronics rides 800G transceivers; Corning wins on fiber volume. Ciena's hyperscaler gains pressure Nokia's optical unit. 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
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
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.comÂ
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.comÂ
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.comÂ
Lumentum's Raman pump lasers could benefit as more inter-site AI network spending shifts to optical line systems. Cignal AI forecasts those systems taking 57% of this spending by 2030, up from 29% in 2026, and identifies Raman amplification as a major cost driver and pump lasers as one of the tightest supply-chain components. Lumentum offers those lasers and the amplifiers built around them. x.comÂ
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.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
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
Applied Optoelectronics might be the best opportunity right now amid a potential laser-supply bottleneck: AleaBitOfReddit reports that Lumentum's CEO said it was effectively sold out through nearly 2029, with hyperscaler demand visibility into 2030-31. That shortage could benefit AAOI. x.comÂ
