Schulz Duggan
AI Supply-Chain Research, Optics/Memory/Macro, Original Asian/US Filings & Pricing
Coherent's booked InP laser capacity gives it a potential path into Nvidia's CPO expansion. Nvidia wants optical-engine capacity up 15x by mid-2027 and holds laser purchase commitments and capacity rights from its $2B Coherent investment. Coherent says fiscal 2027 is essentially booked and customers are reserving into 2028, but most near-term orders are for pluggables and other products; scale-up CPO revenue starts only in H2 2027. Neither company has sized Nvidia's rights. x.comÂ
Coherent's Bernstein upgrade looks priced in, with further upside dependent on rising earnings estimates. At $333.71 it trades at 23.8x the Street's fiscal-2028 EPS of $14.05; Bernstein's $350 target uses 22x its own $16 estimate, near the top of the range, while 22x the Street figure gives $309. Multiples track revisions: Lumentum's estimate rose 22.8% in 90 days and trades at 31.0x, Coherent's rose 12.2%. Coherent's has barely moved in 30 days; fiscal Q1 results in early November are the test. 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
Coherent now has credible exposure to almost every optical architecture hyperscalers are exploring, and its Nvidia deal materially de-risks that roadmap. Nvidia's nonexclusive pact adds a multibillion-dollar purchase commitment, a $2B equity investment and access to five CPO product families. First CPO/NPO revenue targeted for H2 2026 matches Nvidia's timing. Data center and communications are already 72% of revenue. Qualification, standards, concentration and margins remain unsettled. 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
Coherent should benefit as the shift from copper to light inside AI data centers accelerates, with co-packaged optics now in production and near-packaged optics pulling revenue forward. Nvidia's Spectrum-X Photonics switch is in full production, and TrendForce says CPO has entered mass production. Coherent CEO Jim Anderson says CPO and NPO engagement jumped in the past three to six months, nearly every large customer has a project, and its content per socket is similar in either design. x.comÂ
Coherent is set up for a strong 2026 as better manufacturing yields and a new product ramp arrive alongside solid guidance. The company says 6-inch production yields more than 3-inch, and its CPO/NPO ramp starts this year. Good Q4 guidance implies a P/E below 50 for 2027. The broader optics and photonics group, including Lumentum and Applied Optoelectronics, looks super bullish. x.comÂ
VCSEL scale-up optics may spread revenue across more suppliers because they lack the fundamental bottlenecks of InP lasers. Coherent looks well positioned, but the VCSEL opportunity may still be shared more widely; Lumentum is also betting on VCSELs for scale-up. 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
Lumentum stands to gain as the shift from copper to light inside AI data centers accelerates. Co-packaged optics is now in mass production, per TrendForce, with Nvidia shipping Spectrum-X CPO switches. Near-packaged optics is catching on fast; Lumentum CEO Michael Hurlston says its demand looks bigger than CPO's and came sooner, now late 2027 or early 2028. He sees about $40 a share of fiscal 2028 earnings power, above Street estimates, with none of CPO or NPO in the numbers yet. 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
Coherent's new US laser factory, the world's first 6-inch indium phosphide wafer fab, gives it a major technology moat. Six-inch wafers yield four times as many laser chips per wafer. Nvidia CEO Jensen Huang broke ground on the factory, signaling that Nvidia has locked up Coherent's supply for years. x.comÂ
