Core Insights - The article highlights the emerging trend of photonics as a critical component in the infrastructure supporting AI, robotics, and industrial automation, which is gaining attention from investors [1][5] - Photonics technology offers significant efficiency gains by using light to transmit data, reducing energy consumption and heat generation compared to traditional copper wiring [3][4] Industry Overview - Traditional data centers face limitations due to energy waste and heat generation from copper wiring, which is a significant challenge for power-intensive applications like AI [2] - The shift to photonics, utilizing optical interconnects and fiber optics, allows data to be transmitted at the speed of light with minimal energy loss, enhancing performance per watt [3] Investment Opportunities - The article presents a "picks and shovels" investment strategy, focusing on hardware companies essential for AI and automation, such as Lumentum, Jenoptik, and Coherent, which have reported strong earnings [4] - ETFs like ROBO and THNQ provide diversified exposure to companies involved in the photonics infrastructure, which is crucial for the future of AI and robotics [5][7]

Core Insights - Coherent Corp. will showcase its innovations in co-packaged optics (CPO) at NVIDIA GTC DC 2025, highlighting its extensive portfolio of CPO-enabling technologies [1][2] - The company's participation emphasizes its leadership in advancing photonic technologies essential for AI infrastructure and high-speed photonics [2][3] Company Overview - Coherent is recognized as a global leader in photonics, providing technology solutions for datacenter, communications, and industrial markets [4][5] - Established in 1971, Coherent operates in over 20 countries, offering a comprehensive technology stack and resilient supply chain to address complex technology challenges [5]

Company Overview - MACOM Technology Solutions Inc. is a leading supplier of semiconductor products, focusing on high-performance solutions for telecommunications, industrial, defense, and data center industries [4] - The company serves over 6,000 customers annually and has a broad product portfolio that includes RF, microwave, analog, mixed signal, and optical semiconductor technologies [4] - MACOM has achieved various certifications, including IATF16949, AS9100D, ISO9001, and ISO14001, indicating its commitment to quality and environmental management [4] Product Offerings - MACOM's connectivity portfolio includes a wide range of optical and copper-based technologies designed to support high data speeds, such as lasers, modulators, linear equalizers, and optical clock recovery modules [2] - The company is showcasing next-generation solutions enabling 400G per lane data rates over single mode fiber, along with 200G per lane solutions, PCIe 6.0 optical solutions, and a complete DSP-free 100G per lane solution [5] Event Participation - MACOM will showcase its latest analog connectivity solutions at the European Conference on Optical Communication (ECOC) in Copenhagen, Denmark, from September 29 to October 1, 2025 [1][3] - The event will feature live demonstrations of advanced semiconductor solutions aimed at enhancing high-speed connectivity [3]

Group 1 - Lumentum Holdings Inc. (NASDAQ:LITE) has recently experienced a surge in stock price after years of stagnation, prompting discussions on whether to hold or sell the stock [1] - The company produces optical and photonic products, including chips, components, and lasers, which are essential for cloud data centers, AI infrastructure, and various manufacturing sectors such as semiconductors, solar cells, and electric vehicle batteries [2] - Invesco Small Cap Value Fund highlighted that Lumentum reported better-than-expected revenue and earnings for its recent quarter, along with record orders for its data communications laser chips used in data center applications [2] Group 2 - Despite the positive outlook for Lumentum, some analysts believe that certain AI stocks present greater upside potential and carry less downside risk [2]

Industry Overview - The artificial intelligence (AI) infrastructure sector is experiencing significant growth, with a bullish demand scenario and a projected capital expenditure increase of 46% year-over-year, reaching $325 billion by 2025 [3][4]. - The total addressable global sovereign AI market is estimated to be $1.5 trillion, indicating vast opportunities for investment and development in various fields such as healthcare, energy, and cybersecurity [4]. Company Highlights Credo Technology Group Holding Ltd. (CRDO) - Credo Technology is focused on high-performance serial connectivity solutions, particularly in AI server markets, with its Active Electrical Cables (AEC) gaining traction due to their reliability [9][10]. - The company has achieved significant milestones, including an 800-gig transceiver DSP design win and the introduction of ultra-low-power optical DSPs, which are expected to enhance industry standards [11][14]. - CRDO anticipates a revenue growth rate of 85.8% and earnings growth of over 100% for the current fiscal year, with a 37% improvement in earnings estimates over the last 60 days [14]. Jabil Inc. (JBL) - Jabil is benefiting from strong momentum in AI-powered data center infrastructure and has a diversified product portfolio that enhances its resilience against macroeconomic disruptions [15][16]. - The company has a projected revenue growth rate of 5.6% and earnings growth of 17.8% for the next fiscal year, with an 8.4% increase in earnings estimates over the past 30 days [17]. Lumentum Holdings Inc. (LITE) - Lumentum designs and manufactures optical technologies that support AI applications, with a focus on high-speed telecommunications and data centers [18][20]. - The company has a strong collaboration with NVIDIA in developing photonic solutions, which are crucial for AI infrastructure [21]. - LITE expects a revenue growth rate of 32.8% and earnings growth of over 100% for the current fiscal year, with a slight improvement in earnings estimates recently [21].

Summary of Lumentum (LITE) FY Conference Call - May 13, 2025 Company Overview - **Company**: Lumentum (LITE) - **Industry**: Optical components and networking solutions Key Points Demand and Market Outlook - No observed slowdown in ordering patterns; book-to-bill remains positive [3][4] - Customer feedback indicates continued strong demand, with no anticipated slowdown in the next four to five quarters [3][4] - CapEx spending from cloud companies is expected to remain stable or improve in 2026 compared to 2025 [6][7] Tariff Impact and Mitigation Strategies - Tariffs have impacted margins by approximately 100 basis points, primarily due to reverse tariffs on imports from the U.S. to China [8][9] - Lumentum has manufacturing facilities in both China and Thailand, allowing for flexible supply chain management to mitigate tariff impacts [9][10] - Plans to scale up manufacturing in Thailand as a primary strategy to navigate potential tariff challenges [12][13] Industry Dynamics and Competitive Landscape - The optical industry has changed significantly since the sale of Finisar; Lumentum now has a higher component mix and a strong laser footprint [16][17] - Increased demand from U.S. hyperscalers for domestic suppliers due to security concerns is driving market dynamics [20] - The rate of change in the market is accelerating, favoring companies that invest in innovation [21] Business Strategy and Growth Areas - Near-term growth is expected from the transceiver market, where Lumentum currently holds a low single-digit market share [22] - Long-term strategy aims to shift focus towards higher-margin components, particularly co-packaged optics [23][24] - Vertical integration is seen as beneficial but not essential for improving margins in the transceiver business [25][28] Revenue Opportunities and Product Development - Optical Communication Systems (OCS) are expected to generate early revenue by the end of the calendar year, with material revenue anticipated in Q2 FY 2026 [55] - OCS offers advantages in cost, power consumption, and latency, making it a strong alternative to electrical solutions in data centers [54] - The company is exploring opportunities in industrial applications, particularly in semiconductor packaging, to improve profitability [63] Financial Performance and Margin Expectations - Current gross margins for transceivers are below desired levels, with expectations to reach low to mid-30s percentage [49][52] - Overall business margins are targeted to exceed 40% as the company shifts focus towards components [52][53] Conclusion - Lumentum is positioned to capitalize on strong demand in the optical components market, with strategic plans to navigate tariff impacts and enhance profitability through innovation and vertical integration. The company aims to leverage its manufacturing capabilities and market dynamics to achieve sustainable growth in the coming years.