Applied Optoelectronics Is Up 175% in 2026 and Lumentum Is Up 164%: Take Profits, or Hold On for the Ride?

Optical connectivity, the hardware that moves information through artificial intelligence (AI) data centers, has produced some of the market’s biggest winners this year. That leaves shareholders deciding whether to bank their gains or stay put. Applied Optoelectronics (NASDAQ:AAOI) stock trades at $95.94, up 175% year to date.

Meanwhile, Lumentum (NASDAQ:LITE | LITE Price Prediction) stock is at $973.77, up 164% year to date, close behind the group leader. At the same time, Coherent (NYSE:COHR) stock trades at $286.05, up 55% year to date, a strong gain that still trails both leaders by a wide margin.

For sector context, the iShares Semiconductor ETF (NASDAQ:SOXX) is up 79% year to date. By comparison, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is up 14% in 2026 so far.

AI Cluster Buildouts Fuel Optical Demand

Applied Optoelectronics designs and manufactures optical transceivers, modules that convert electrical signals into light so information can move between servers and switches inside a data center. Lumentum and Coherent make the lasers and optical components that go into those modules, and both also sell into telecommunications networks, giving each a broader revenue base.

The expansion has become enormous. The Department of Energy projects data centers could account for up to 12% of U.S. electrical demand by 2028, driven by AI development (we rounded up seven suppliers riding that same expansion, from power to optical, in a free report here).

Direct AI Exposure Split the Group

All three optical stocks have risen far ahead of the broad market this year, and the largest gains belong to the pair most concentrated in data center optics. Of the three, Applied Optoelectronics is the smallest by a wide margin. Those backing Applied Optoelectronics argue that transceiver demand follows cluster construction that’s already committed.

The bear case, by contrast, centers on scale and pricing. Applied Optoelectronics is a small manufacturer competing against far larger suppliers on a product that commoditizes as each speed generation ages. After rising 175% this year, Applied Optoelectronics stock already reflects a great deal of that demand.

AI demand is reshaping data center optics. Data centers are moving from 800G transceivers toward 1.6T designs, and co-packaged optics, which place the optical engine beside the switch chip, are lined up behind them. Each step can reset pricing and open a fresh contest for share against larger rivals.

What to Watch Next

Applied Optoelectronics’ open question is whether its order book holds through the next transceiver speed transition. That handoff is where a component supplier either defends its position or loses it, and investors can watch for whether new orders keep pace as customers qualify the faster modules.

Lumentum faces a parallel test because its lasers sit inside the same class of next-generation modules, and Lumentum stock carries a gain nearly as large. Coherent stock, with the smallest gain of the three, offers a useful benchmark for the wider optical supply chain.

Gains this large can reverse quickly. Over the past month, Applied Optoelectronics shares are down 9%, a slide that shows how fast sentiment can turn on the smallest name in the group. AAOI shareholders face a difficult profit-taking question, and investors considering whether to lock in their profits should size their positions to their own risk tolerance.

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