Martin Bradstreet
Investor & Programmer, Former Poker Player
Sumitomo Electric is not an attractive long at about 30x earnings because too much of its revenue comes from automotive components, historically a terrible business. It is well run, with high operating cash flow and major earnings growth, and should still do well in physical AI, but there are better spots. Its equal or better InP manufacturing capability, with supply it can add fairly quickly if margins explode, instead underpins a small short on AXT. x.comÂ
TE Connectivity's mix is shifting toward AI and robotics, which makes its valuation look reasonable. AI-related revenue tripled to over $900M and Industrial Solutions grew 23.7% on automation and robotics demand, while FY2025 revenue rose 8.9% to $17.26B. It sells sensors and interconnects for humanoid robots and cobots, and $3.21B of adjusted free cash flow funds buybacks and the dividend. At 20.5x trailing earnings, a blended model puts fair value near $241, about 20% upside. x.comÂ
Sivers' risk-reward looks worse than Applied Optoelectronics', which offers more growth, less risk and a cheaper multiple. Sivers guided to 25-30% CAGRs, implying only 8-10% conversion of its $1.2 billion pipeline; even a bullish 15-20% conversion gives $69-84 million of 2029 revenue, leaving it near 9.8x FY29 revenue. AAOI could grow about 95% a year with capacity expansion, or 80%-plus after heavily discounting that, yet trades below 2x 2029 modeled revenue. x.com x.comÂ
Sumitomo Electric Industries is a growth company priced as value, at a 16.2x trailing P/E despite holding many long-term agreements with AI hyperscalers spanning fiber to lasers. AI has created a bigger medium-term anomaly, pushing value investing toward high-growth, deep-value companies. x.comÂ
Sumitomo Electric owns both key layers of the optical laser supply chain: it is #1 in indium phosphide substrate with about 42% share and a capacity leader in CW-DFB lasers. Lumentum prepaying AXT $43.5M for substrate through 2031 shows where the leverage sits, yet AXT is only one of three suppliers. Sumitomo gets little attention. x.comÂ
