Nvidia's deal with Nokia hints: Mizuho names 10 stocks to invest in optical networks

There is a sector in the artificial intelligence market that retail investors "least understand" and perhaps "least invested in" compared to computer memory, energy and semiconductor manufacturers - optical networks, says Mizuho analyst Jordan Klein. Artificial intelligence is increasing data transmission requirements: copper wires can no longer cope, and optical technologies are growing in importance. Mizuho named ten promising stocks that can help investors capitalize on this trend.

Mizuho analyst Jordan Klein believes optical networking stocks could be an interesting alternative to investing in semiconductors amid the artificial intelligence boom, MarketWatch reports .

Today's AI models process colossal amounts of data, and familiar copper cables are no longer adequate for such loads, the publication writes. The new generation of AI chips is forcing companies to switch from copper to optical technology. Developing AI at the edge - that is, locally on devices such as wearable gadgets, cars and robots, rather than on a remote server - will require further innovation in this area, MarketWatch says. The partnership between Nvidia and Nokia, in which the leading AI processor maker buys a $1 billion stake in a networking company, shows that it is the speed and quality of network connections that are now acting as the main brake on AI development, MarketWatch says.

Optical networking stocks are the ones that investors "understand the least" and therefore are probably "the least likely to invest in," Klein noted. While these stocks are growing rapidly, they also come with increased risks due to heightened volatility, making them more difficult to evaluate, the analyst warned.

Klein highlighted 10 companies that he believes are best prepared for the growing demand for high-speed connectivity.

- Credo Technology Group Holding Ltd. The stock has appreciated by 174% in 2025. The company is followed by 14 analysts, with 13 recommending Buy (Buy and Overweight ratings) and one recommending Hold (Hold).

- Lumentum Holdings Inc. The stock jumped 140% in 2025. 21 analysts follow the company: 15 advise to buy the stock, six advise to hold.

- Ciena Corp. The stock is up 124% in 2025. They have 20 ratings: 14 suggest a buy recommendation, four suggest a hold recommendation, and two suggest a sell recommendation (Underweight and Sell).

- Amphenol Corp. The company's stock is up 103% since the start of 2025. They have 22 ratings from analysts: 15 advise buy, seven advise hold, MarketWatch shows.

- Fabrinet. The securities have added 101% in price since the beginning of the year. Out of 10 analysts who follow the company's securities, seven advise to buy them, three - to hold.

- Astera Labs Inc. The value of its shares has increased by 46% since January. The securities have 21 ratings: 15 recommendations to buy, five to hold and one to sell.

- Arista Networks Inc. The stock is up 41% in 2025. They have 29 ratings: 24 advice to buy, four to hold, one to sell (Underweight).

- Coherent Corp. The company's stock is up 39% since the beginning of the year. They have 23 ratings: 19 tips to buy and four tips to hold.

- Macom Technology Solutions Holdings Inc. The stock's growth since the beginning of 2025 is only 14%. The securities have 17 ratings from analysts: 14 advise to buy them, three - to hold.

- Semtech Corp. The stock is up only 8% in 2025, with analysts almost unanimously advising to buy. The stock has 15 ratings, only one of which is a hold recommendation. There are no sell recommendations.

These companies' price-to-earnings (P/E) and price-to-sales (P/S) ratios are above the S&P 500 average, but their average annual sales growth rates are well above the index's 6.5%, MarketWatch writes. Shares of most of these companies are growing faster than the S&P 500 in 2025, MarketWatch writes .

All of these companies will benefit from the boom in high-speed connectivity, Brad Gastuirt, head of research and analytics at Circular Technology, told MarketWatch in a commentary. He predicts that the optical components market will grow more than 50% in 2025 and continue to grow strongly through 2026. The volatility of these companies is due to the cyclical nature of the industry, high customer concentration, constant technology updates, and fluctuations in demand, the analyst says. However, he expects connectivity solutions to remain scarce in the near future, which will support these companies.

"I don't believe we are close to overproduction," Gastuirt concluded.

Needham N. analyst Quinn Bolton raised his target price on Semtech and Credo shares in August and September, respectively. Credo's new generation of chips uses less power and is more efficient, and Semtech is poised to increase production of components for Tensor Processing Units, Google's specialized processors used to accelerate artificial intelligence, the analyst said.

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