AI hardware stocks surge as optical demand drives Coherent up 19%

Optical component makers led a broad AI hardware rally in pre-market trading Monday, with Coherent jumping 19.3% and Lumentum gaining 13.7% as investors piled into data center infrastructure names.

Lumentum management said in its fiscal Q2 earnings call that the backlog for optical circuit switches and co-packaged optics has swelled past $400 million, with operations fully booked through 2027. The company reported Q2 revenue of $665.5 million, up 65.5% year over year, and guided Q3 revenue to $780 million to $830 million.

The broader AI hardware complex rallied across the board. Marvell Technology rose 8.9%, SanDisk gained 5.4%, Seagate added 5.5%, and Western Digital climbed 5.8%. AMD advanced 5%, Intel gained 5%, and Micron rose 4.3%. NVIDIA added 1.4%, TSMC gained 2.2%, and Broadcom rose 2.5%. SK Hynix climbed 3.9%, ASML added 2.6%, Lam Research rose 4.7%, Arm Holdings gained 4.6%, and Qualcomm added 2.5%.

The outsized moves in optical and networking names point to accelerating AI data center buildout, where high-speed optical interconnects are replacing traditional copper wiring. Nvidia's $2 billion investment in Lumentum and a multibillion-dollar purchase commitment have positioned the company's AI-focused optical components as fully allocated through 2027, with a seven-year supply agreement for indium-phosphide wafers insulating it from Chinese export restrictions.

Optical Interconnects: The New Bottleneck in AI Infrastructure

The optical component rally traces back to Nvidia's March announcement of multiyear strategic agreements with Lumentum to accelerate advanced optics R&D for future AI infrastructure. The nonexclusive deal includes a multibillion-dollar purchase commitment and future access to capacity for advanced laser components. Nvidia is also investing $2 billion in Lumentum to support R&D and US-based manufacturing capacity in a new fab.

Lumentum's stock has risen more than 850% over the past year, from a 52-week low of $45.65 to a high of $783.80 in March. The company joined the S&P 500 on March 23, 2026, transitioning from the S&P MidCap 400. Its market cap stood at roughly $46.4 billion as of March.

Coherent, which makes similar optical components for data centers, has been a direct beneficiary of the same demand wave. The company's 19.3% pre-market gain Monday was the largest among AI hardware names.

Broad Rally Spans Memory, Foundry, and Equipment

The pre-market surge extended well beyond optical components. Storage names rallied strongly, with SanDisk up 5.4%, Seagate up 5.5%, and Western Digital up 5.8%. Memory makers SK Hynix and Micron gained 3.9% and 4.3% respectively. Foundry leader TSMC added 2.2%, while equipment makers ASML and Lam Research rose 2.6% and 4.7%.

Semiconductor design names also advanced, with Arm Holdings up 4.6%, Qualcomm up 2.5%, and Broadcom up 2.5%. NVIDIA, the sector's bellwether, gained 1.4%.

The breadth of the rally suggests investors are pricing continued AI infrastructure spending across the entire supply chain. Lumentum's management has set a target of reaching a $2 billion quarterly revenue run rate within two years, up from $665.5 million in the most recent quarter.

For investors, the key question is whether the optical component rally has room to run. Lumentum's order book is full through 2027, and the company's gross margin expanded 1,020 basis points year over year to 42.5%. Operating margin rose 1,730 basis points to 25.2%. These fundamentals support the current valuation, though the stock's 850% annual gain means expectations are high.

This article is for informational purposes only and does not constitute investment advice.