The Motley Fool·2025-12-10 19:25Core Viewpoint - The article discusses the short-term benefits Lumentum has gained from AI, while suggesting that Alphabet presents a more promising long-term investment opportunity due to its diversified revenue streams and substantial profitability [1][2]. Lumentum's Performance - Lumentum has experienced significant growth, with its stock surging 267% year-to-date [1]. - The company reported a 58% increase in revenue for the first quarter, reaching nearly $534 million, and non-GAAP net income rose from $0.18 per share to $1.10, surpassing Wall Street's estimate of $1.03 [5]. - Management provided strong guidance for the second quarter, expecting sales of $650 million, a 62% increase from the previous year [6]. Market Context - The data center spending is projected to increase significantly, with Nvidia's CEO estimating that big tech companies will invest between $3 trillion to $4 trillion over the next five years, which could benefit Lumentum [6]. Alphabet's Advantages - Alphabet generated $102 billion in sales in the most recent quarter, with earnings per share of $2.87, supported by its diverse business segments [9]. - The company is actively competing in the AI chatbot market with its Gemini 3 chatbot, which has 650 million weekly users, and its AI Mode on Search has 2 billion monthly users [11]. - Alphabet has over $24 billion in free cash flow available for investment in new AI ventures, indicating a long-term advantage over Lumentum [12]. Valuation Comparison - Alphabet's price-to-earnings ratio is 31, significantly lower than the tech sector's average of 46 and Lumentum's P/E ratio of 203, suggesting that Alphabet offers better value for investors [13].