Applied Optoelectronics Plunges 15%, Coherent Tumbles 13% as Hyperscaler Spending Fears Hit AI Optics Stocks; Lumentum and Marvell Sink 10%

AI optics stocks are taking the hit from this week’s Big Tech earnings as cares about hyperscaler spending spread down the supply chain. Applied Optoelectronics (NASDAQ:AAOI) stock is at $67.40 in afternoon trading, down 15%. Meanwhile, Coherent (NYSE:COHR | COHR Price Prediction) stock is at $206.43, down 13%.

Lumentum (NASDAQ:LITE) stock is at $824.82, down 10%. At the same time, Marvell Technology (NASDAQ:MRVL) stock is at $197.50, down 10%. These four companies make the lasers, transceivers, optical chips and signal processors that carry data between servers inside AI data centers. That’s why their order books rise and fall with the budgets of hyperscalers, the big cloud companies that build those facilities.

Applied Optoelectronics stock is still up 93% year to date (YTD) despite the drop, leaving traders with plenty of gains to lock in. Profit taking after that run may be adding pressure on Applied Optoelectronics as the broader optics group sells off.

Google’s Cash Burn Rattles the AI Optics Supply Chain

Google, a unit of Alphabet (NASDAQ:GOOGL), lost more than $500 billion in market value on October 29 as investors absorbed quarterly free cash flow of negative $9.1 billion. Wall Street analysts had expected negative $3.5 billion. Brian Sozzi of Yahoo Finance argued that hyperscalers’ ballooning AI bills are the core problem, a view that lands hard on Google’s suppliers.

Suppliers feel that strain quickly because a few cloud giants buy most of what they make. Applied Optoelectronics disclosed on August 6 that its top 10 customers made up 99% of Q2 2026 revenue. Applied Optoelectronics has also raised $538.8 million through an at-the-market (ATM) stock offering, which keeps dilution and capital needs in focus.

Bulls point out that demand at Applied Optoelectronics still runs ahead of supply. Founder and CEO Thompson Lin told analysts on the August 6 call that “forecast demand continues to outpace our production capacity through mid-2027.”

Coherent, Lumentum and Marvell Slide on Overlapping Pressures

Coherent stock is down 29% over the past month, and the sector selloff has pushed that decline further. Management sounded confident on August 12, when CEO Jim Anderson said, “We continue to see no signs of attenuation in customer demand.”

A possible merger gives Lumentum and Marvell something extra to trade on. Bloomberg reported on October 29. Marvell is in advanced talks to buy Lumentum in an all-stock deal that could be announced as soon as next week, though the talks could still end without a deal. Those companies already do business together, since Marvell buys lasers from Lumentum.

Both stocks went into the selloff with big gains, and Lumentum stock is up 124% YTD. Marvell stock is up 133% YTD, so part of the decline looks like profit taking in crowded AI winners. Google is one of Marvell’s custom AI chip customers, an awkward overlap with this week’s spending concerns.

Lumentum plans to invest at least $350 million in Japan to expand production of indium phosphide and other optical components. CEO Michael Hurlston said earlier this month that Lumentum’s optical components are sold out through early 2029.

How Applied Optoelectronics Stands Apart From Its Rivals

Applied Optoelectronics is the smallest and most concentrated of the four, building data center transceivers around lasers it makes in-house in Houston, and the company also sells cable TV (CATV) equipment, which gives it a second business outside AI. Coherent runs a broader photonics portfolio that includes industrial lasers alongside its data center optics.

Lumentum relies on laser chips, pump lasers and optical circuit switches, a mix that leans heavily on components. Marvell works at the silicon layer, designing custom AI chips and the signal processors that sit inside optical modules.

What Could Reset Applied Optoelectronics and the Optics Trade

Applied Optoelectronics, Coherent and Lumentum all have earnings reports coming up, and a shaky market with results this close can magnify selling as traders cut risk. For Applied Optoelectronics, the question is whether its 1.6-terabit (1.6T) transceiver shipments ramp the way management described. A formal Marvell-Lumentum announcement and fresh hyperscaler spending commentary could move the group sharply in either direction.

The bull case rests on order books that management teams describe as sold out or limited by capacity well into 2027. Any pullback by Google or other cloud giants would hit concentrated suppliers far harder, and retirement savers should keep in mind that these supplier stocks can swing much more than the hyperscalers they sell to. Investors may want to stay cautious while the hyperscaler spending debate plays out.

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