Shares of Applied Optoelectronics (NASDAQ:AAOI) are down 9% midday Friday to roughly $154, leading a broader cool-off in AI optics names. Coherent (NYSE:COHR | COHR Price Prediction) is off 8% to about $346, and Lumentum (NASDAQ:LITE) is sliding 4% to around $829.
The drops look dramatic on the day, yet they barely dent the year’s gains. AAOI stock is up 341% year to date (YTD) while COHR stock has climbed 87% and LITE stock is up 125%.
No known company-specific bad news has surfaced for AAOI, COHR, or LITE today. The selloff carries the signature of profit-taking and sector rotation after one of the most aggressive AI infrastructure rallies in recent memory.
Profit-Taking Hits the Year’s Biggest Optics Winners
Friday afternoon flows tell the story. After Dell Technologies (NYSE:DELL) posted blowout AI server earnings yesterday, the optics complex ripped higher into today’s session. The current action has the feel of buy-the-rumor, sell-the-news as traders trim their hottest winners ahead of the weekend.
The underlying fundamentals haven’t shifted. Applied Optoelectronics guided Q2 2026 revenue to a range of $180M to $198M, with management flagging an even larger sequential ramp in Q3 as Houston capacity comes online. Moreover, Coherent’s fiscal Q3 2026 datacenter and communications segment grew 41% year over year (YoY) and now represents 75% of revenue mix.
Lumentum’s setup is similarly strong. Optical circuit switching backlog topped $400M, and management cited an incremental multi-hundred-million-dollar CPO order deliverable in the first half of 2027. The demand picture in AI data center optics remains intact even as the share-price reaction cools.
ServiceNow Rally Hints at Rotation
Where is the money going today? ServiceNow (NYSE:NOW) stock is ripping higher, up 14% intraday, joining a broader enterprise software bid. With NOW shares down 29% YTD heading into today, the setup looks like the mirror image of the optics complex.
That rotation dynamic helps explain why even the strongest AI photonics stories are vulnerable to pullbacks. After parabolic runs in names like AAOI and LITE, capital often resets toward beaten-down corners of the AI stack, especially on the final trading day of the month. Today’s action reflects positioning rather than a change in fundamentals.
Optics Stock #1: Applied Optoelectronics
Applied Optoelectronics designs optical transceivers and components for data center and telecom networks. Its datacenter segment more than doubled to $81.4M YoY in Q1 2026 on demand for 800G transceivers tied to AI buildouts.
The catch is the run-up. AAOI stock entered today already up triple digits YTD, and the magnitude of the pullback looks proportional to the move that preceded it.
Optics Stock #2: Coherent
Coherent makes lasers, photonics, and optical communications components, including critical parts for AI data center interconnects. The company reported fiscal Q3 2026 revenue of $1.81B, up 21% YoY, beating estimates and joining the S&P 500 this year.
COHR stock has become a core AI infrastructure holding for many funds. A single-day 8% draw on profits this large is hardly unusual for a name that has more than doubled YTD.
Optics Stock #3: Lumentum
Lumentum is a major supplier of photonic products and lasers, including optical components used in AI data center networking. Its fiscal Q3 2026 revenue guide of $780M to $830M implied over 85% YoY growth, one of the cleaner acceleration profiles in the group.
LITE stock has been the runaway leader of the cohort. After a quadruple-plus over the past year, a 4% trim sits well within normal volatility for the name.
What to Watch
The key question is whether dip-buyers step in before the close or let these names settle for the weekend. Muted Reddit sentiment on LITE this week, with neutral scores in the 50 to 55 range, suggests the move so far has been institutional rather than retail panic.
From a research standpoint, the AI optical demand thesis underpinning AAOI, COHR, and LITE appears intact. However, after gains of this magnitude, sharp single-day pullbacks come with the package. The next round of hyperscaler capex commentary could shape the next share-price moves in these optics names.
Prudent investors may want to size their positions modestly in the optics complex and watch for whether the group holds key levels into next week’s open. Today’s action looks like profit-taking after extreme runs, and the AAOI, COHR, and LITE trade has clearly entered a more volatile chapter worth approaching with discipline.
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