The optical components complex is extending its powerful run again in early trading Wednesday, with three of the group’s bellwethers building on Monday’s massive rip. Applied Optoelectronics (NASDAQ:AAOI) shares are up 8% intraday, trading near $203, while Coherent (NYSE:COHR | COHR Price Prediction) stock has climbed 4% to around $390.
Lumentum Holdings (NASDAQ:LITE) is also participating, with LITE shares rising 4% to roughly $1,031 from a prior close of $992.37. The continuation move follows Monday’s outsized gains of AAOI +23%, LITE +17%, and COHR +13%, a rebound from the prior Thursday’s sharp sector-wide selloff.
For investors keeping score, the year so far has been historic. AAOI stock is up 488% year to date, LITE shares have gained 180%, and Coherent stock has more than doubled with a 112% gain.
Earnings Beats and AI Capex Fuel the Move
Coherent set the tone last week with fiscal Q3 2026 results reported May 6. Revenue of $1.81 billion beat expectations and climbed 21% year over year, with the Datacenter & Communications segment now representing 75% of total revenue.
Coherent CEO Jim Anderson cited “exceptionally strong demand across our datacenter and communications businesses” and pointed to a deepening relationship with NVIDIA, which has put a $2 billion investment behind the partnership. Management guided fiscal Q4 revenue to $1.91 billion to $2.05 billion.
Applied Optoelectronics followed on May 7 with Q1 2026 revenue of $151.14 million, up 51% year over year. The datacenter segment more than doubled to $81.4 million, and CEO Thompson Lin confirmed the company completed its “first volume shipment of our 800G products to one of our large hyperscale customers”.
Lumentum’s setup was already strong heading into this week. CEO Michael Hurlston flagged optical circuit switch backlog exceeding $400 million and a multi-hundred-million-dollar co-packaged optics order for delivery in the first half of calendar 2027. Multiple price target hikes have followed, with Jefferies at $1,200 and JPMorgan at $1,130.
Why the Optics Complex Trades as One Unit
Investors are treating AAOI, COHR, and LITE as a single thematic basket tied to AI data center capital spending. The shared exposure to hyperscaler buildouts, 800G and 1.6T transceiver demand, optical circuit switching, and co-packaged optics means flows tend to hit all three at once.
That correlation cuts both ways. Last Thursday’s pre-earnings flush dropped AAOI 14%, COHR 10%, and LITE 8% in a single session before Monday’s rebound erased the damage and then some. Same-week double-digit swings in either direction are now routine in this group.
Recent deal flow keeps reinforcing the structural story. The NVIDIA-Corning $500 million arrangement and Akamai’s $1.8 billion AI Frontier model deal underscore that optical connectivity is the critical bottleneck once GPU clusters scale past copper’s distance limits.
Risks and What to Watch
The one-year return profile is extraordinary, and that creates an elevated bar. LITE stock is up 1,283% over the past year, AAOI shares have gained 910%, and Coherent stock has tacked on 395%. Reddit sentiment on LITE has recently flipped sharply bullish, very bearish (18) on May 6 to very bullish (82 to 88) by May 10 through 12, mirroring the price action.
Customer concentration with a handful of hyperscalers remains a key vulnerability across the optics group. Any cyclical pause in AI capex would ripple through Applied Optoelectronics, Coherent, and Lumentum in tandem. Prudent investors weighing exposure here might consider moderating position sizing given the parabolic chart pattern.
The next catalysts to track are hyperscaler capex commentary, additional NVIDIA (NASDAQ:NVDA)-related announcements, and the next earnings cycle. Watch for whether today’s gains can hold into the close, and whether the group can string together a third consecutive up day after Tuesday’s modest consolidation.
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