Optical Stocks Extend Slide as Money Rotates Into Defensives: Applied Optoelectronics Falls 6%, Coherent Drops 7%, Lumentum Slips 5%

Optical suppliers tied to the artificial intelligence (AI) data center buildout are extending their slide as money shifts into defensive sectors. Applied Optoelectronics (NASDAQ:AAOI) stock is down 6% to $80.97 in early trading, leading the group lower.

Meanwhile, Coherent Corp. (NYSE:COHR | COHR Price Prediction) shares are down 7% to $244.16. Lumentum Holdings (NASDAQ:LITE) stock is down 5% to $851.13, slipping alongside its peers.

This selloff extends across the whole photonics theme. The Roundhill Photonics & Optics ETF (CBOE:LYTE) is down 5% to $20.29. By contrast, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is down just 0.08% to $768.98.

Money Rotates Out of AI Hardware

Money is rotating out of AI and technology names into defensive sectors, and optical suppliers are among the hardest hit. Applied Optoelectronics, Coherent and Lumentum supply the lasers, transceivers and optical components that move information inside data centers, so their revenue tracks hyperscale spending. That tie made them some of the biggest AI infrastructure winners of 2026. They are also quick targets when fund managers trim tech exposure (we covered seven more picks-and-shovels AI suppliers, from power to networking, in a free report).

Over the past week, Applied Optoelectronics, Coherent and Lumentum have issued no press releases, which leaves the sector rotation as the clear driver. Lumentum shares and other optical stocks were also among the market’s biggest losers on Monday, so the current drop extends a slide already in motion.

Shares of Applied Optoelectronics are still up 128% year to date (YTD), while Lumentum shares are up 127% YTD. Coherent stock is up 32% YTD. Gains that large often draw profit-taking once a rotation starts.

Applied Optoelectronics Swings Widest in the Group

Scale explains why Applied Optoelectronics leads the decline. With a $6.76 billion market value, it’s by far the smallest of the three, and Applied Optoelectronics stock swings widest in both directions. Applied Optoelectronics also sells 1.8 GHz CATV products to broadband operators, giving it a second business beyond data centers.

Recent results give Applied Optoelectronics a strong background. In Q2 2026, the company posted revenue of $191.92 million, up 86.4% year over year (YoY), for its fifth consecutive record quarter. Its Datacenter segment more than doubled YoY to $107.66 million on the 800G ramp.

Management guided Applied Optoelectronics’ Q3 2026 revenue to $255 million to $290 million and expects demand to outpace production capacity through mid-2027. Applied Optoelectronics is aiming approximately 650,000 pieces per month of 800G and 1.6Tb transceiver capacity by year-end.

Coherent and Lumentum Ride the Same Optical Shift

Coherent sells optical transceivers, indium phosphide lasers, silicon photonics and co-packaged optics (CPO) for AI data center interconnects. On Coherent’s August 12 earnings call, CEO Jim Anderson spoke. He stated, “We continue to see no signs of attenuation in customer demand.” The company’s recent S&P 500 inclusion added momentum to Coherent stock.

Lumentum builds lasers, modules and optical subsystems. Management has stated AI workloads are pushing data center architects toward optical links, lifting demand for CPO lasers, and that it’s reaching its target operating model more than a quarter ahead of schedule.

Hyperscale Orders Are the Next Test

Investors will soon learn whether hyperscale order commentary from Applied Optoelectronics, Coherent and Lumentum holds up. Until then, the wider swings in Applied Optoelectronics stock argue for investors keeping their allocations moderate, though the company’s guidance and capacity ramp could support the bull case if AI spending holds.

For Coherent, the bull case is management seeing no attenuation in demand. On the downside, the stock still depends on the same hyperscale budgets as its peers.

Lumentum’s YTD run leaves room for more profit-taking, though reaching its target operating model early supports the longer-term case. So, the takeaway is to treat this as a rotation, not a broken thesis, until order commentary says otherwise.

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