Simjo
Fundamental Equity Analyst, Geopolitics
Optical stocks such as Lumentum, MACOM and Applied Optoelectronics look set up the way memory did in 2024, because shortages across every layer of the supply chain do not clear in two quarters. All three flagged extreme demand imbalances on earnings. Per @aleabitoreddit, a Taiwanese supplier's GM said the entire chain, from PCBs and carrier boards to laser chips and packaging, is out of stock, with shortages likely lasting the next few years. 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
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.com
Lumentum, AXT and Coherent face potential delays to CPO and 800V, and their charts started flopping as if the stocks knew ahead of time. Per @BULLOFBRITAIN, citing a SemiAnalysis report, CPO and 800V could be pushed back to 2028–29 while NPO potentially accelerates, with caution urged on names including Lumentum. x.com
Optical suppliers face demand beyond capacity, strengthening the sector's case for the coming months. Lumentum's CEO says it is effectively sold out through early 2029; Ciena says lead times limit growth, and Coherent cites constraints across nearly every product line. Applied Optoelectronics doubled its share count to expand capacity and meet demand. Soitec raised guidance twice this year; Marvell raised guidance and its 2030 TAM, while Broadcom sees 4x EPS by 2030 on visible demand. 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
Applied Optoelectronics is in the right place at the right time but isn't a high-quality business; it mainly serves as spillover capacity when Lumentum, Coherent and Marvell can't meet demand, so why own it over Marvell? Management also draws terrible Glassdoor reviews, 1.7 of 5 stars, 1% CEO approval and 7% recommending it across 124 reviews, pointing to high turnover and operating risk. The tone of its earnings call was also off-putting. x.com x.com x.com
Lumentum's AI-optics case gains longer supply visibility: CEO Michael Hurlston says capacity is effectively sold out through early 2029 and expects roughly 70% of demand for some products to go unmet through 2027; others could face roughly 30% unmet demand through 2028. Scarcity could support pricing, but earnings growth depends on capacity expansion and yield improvements translating into shipments, revenue and margins. x.com
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.com
Applied Optoelectronics' future earnings are not guaranteed, so its elevated price is highly susceptible to a drawdown that could create a far better buying opportunity by the end of next year. Capex can be cut, public and political pushback can delay data centers, and new data centers may fail to secure financing, any of which would cut projections. @RatWasteCapital counters that at $90 the stock trades at about 6x fiscal 2028 EPS if a $5.6B run rate holds. x.com x.com
Networking is the next AI hardware trade after memory, whose share of rack value rose from 15% to 35%. Optics is moving inside the server, as Nvidia's Feynman architecture builds in co-packaged optics and silicon photonics. Scale-across networking could grow 30% a year just linking existing data centers, as inference moves closer to users and training spreads across sites. Supply is tight: Lumentum's CEO said it can meet only 30% of expected 2027 demand and sees optics tighter than memory. x.com
