Data center optics are sold out for the next two years — Lumentum. Who else is seeing gains?

Optical components from Lumentum, a photonics manufacturer in which Nvidia has invested, are completely sold out through early 2029, the company says. As a result, not only have its shares risen, but so have the stock prices of other optical component manufacturers. This clearly demonstrates the frenzied demand for infrastructure for artificial intelligence data centers, notes StockTwits. However, there is also cause for concern.

Lumentum will not be able to meet about 70% of the demand for certain products until next year, and a 30% shortfall will persist for a number of other items through the end of 2028, Michael Hurlston said on Friday, October 9, in an interview with Bloomberg. “We’re really trying to catch up [with demand] and are ramping up capacity as fast as we can, but we’re very, very far behind customer requests. Our products are completely sold out, and there’s no end in sight,” Hearlston said.

To meet the surging demand, Lumentum has increased production capacity at its key plant in the Tokyo metropolitan area 12-fold over the past two years. However, to expand its product line, the company will have to consider acquiring another market player, Hurlston noted.

Companies like Lumentum need three to five years to build new manufacturing facilities. The largest cloud providers have agreed to shoulder some of the risks associated with capital expenditures, according to a top executive. “These hyperscalers are willing to invest in this,” he added.

Lumentum’s stock rose more than 6% in premarket trading on October 9 following statements by its CEO. Year-to-date, the stock is up 185%. In October, the stock hit a new all-time high, but their growth has slowed as investors have become increasingly cautious about the global data center construction boom due to rising costs, debt burdens, and competition, according to Bloomberg.

Following statements from Lumentum's management, shares of several other optical component manufacturers also rose. This underscores the strong demand for infrastructure for artificial intelligence data centers, according to StockTwits.

For example, Applied Optoelectronics shares rose 6.8% in premarket trading on October 9 (+204% year-to-date), Coherent shares gained about 4.6% (+64% year-to-date), and POET Technologies shares rose 3.2% (+11.2% year-to-date).

Shares of optical component manufacturers have been among the main beneficiaries of this year’s rally in the artificial intelligence infrastructure sector, as hyperscalers ramp up spending on data centers and high-speed networks, according to StockTwits.

Amid a global boom in the construction of data centers and other infrastructure for artificial intelligence, investors are becoming increasingly cautious due to rising costs and debt burdens, Bloomberg reports. To allay the concerns of key suppliers, major technology companies are offering guarantees on long-term agreements, the agency notes.

The sector is bracing for new supply restrictions amid reports that the U.S. is considering a ban on new models of Chinese optical transceivers. According to Counterpoint Research, Lumentum and Coherent will not be able to fill the resulting gap if Chinese manufacturers such as Innolight exit the market.

Lumentum, which received a $2 billion investment from Nvidia earlier this year, supplies cutting-edge indium phosphide devices that enable high-speed cloud computing and data transmission. Analysts estimate that Lumentum’s sales are set to more than double this year, according to Bloomberg.

Optical communications and silicon photonics—which use light to transmit data instead of electrical signals—are poised to replace copper connections in data center clusters as cutting-edge artificial intelligence equipment demands ever-higher transmission speeds. In addition, these technologies help reduce heat generation and energy consumption in these systems.

This article was AI-translated and verified by a human editor