Analyst rethinks under-the-radar stock backed by Nvidia
Nvidia’s (NVDA) backing is often seen as a vote of confidence in a company’s technology and growth potential.
The U.S. chip giant announced this week that it will invest $2 billion in Lumentum Holdings (LITE) and another $2 billion in Coherent Corp. (COHR), as it looks to strengthen supply chains needed for the massive buildout of AI infrastructure.
Both companies develop optical technologies that use light to transmit data or perform sensing functions. Faster data transit is critical for running AI models.
Nvidia is also making multi-billion-dollar purchase commitments with each company.
“Together with Lumentum, NVIDIA is advancing the world’s most sophisticated silicon photonics to build the next generation of gigawatt-scale AI factories,” Nvidia CEO Jensen Huangsaid in a statement.
Investors have already pushed the stocks sharply higher. Lumentum shares have surged about 76% year-to-date and are nearly 10x higher over the past 12 months as of March 5.
Coherent stock has gained about 37.5% this year and is up roughly 250% over the past 12 months.
Getty Images
Analysts significantly boost Lumentum price target
Analysts sharply lifted their price targets on Lumentum following the news of Nvidia’s investment.
Rosenblatt analyst Mike Genovese raised his price target on the stock to $900 from $580 and maintained a buy rating, The Fly reported.
Related: Morgan Stanley changes its Nvidia position for the rest of 2026
The firm said the deal appears to be driven by demand for co-packaged optics (CPO), a technology that moves data more efficiently within AI data centers. Rosenblatt also pointed to stronger long-term earnings potential.
Stifel analyst Ruben Roy increased his price target for Lumentum stock to $800 from $480, while reiterating a buy rating.
After recent meetings with CEO Michael Hurlston following the company’s fiscal second-quarter results, the analyst is raising what he called the “admittedly conservative estimates.”
On Feb. 3, Lumentum reported strong fiscal second-quarter results, with revenue rising 65.5% year over year to $665.5 million. Non-GAAP earnings came in at $1.67 per share, sharply higher than 42 cents a year earlier, up 298%.
What does the investment mean to Nvidia?
Nvidia’s investment in the two optical tech companies is “driven by the physical limits of copper interconnects at the data rates AI clusters now demand,” Brendan Burke, research director of Futurum, said in a note.
Burke said traditional copper links are impractical for the 800 Gbps speeds required in modern AI fabrics. As copper reaches its limit at higher frequencies, the optical transition is “mandatory.”
“The investment in Coherent and Lumentum ensures Nvidia controls access to the specialized laser and packaging technology required to execute that transition,” Burke noted.
Nvidia’s AI portfolio
Nvidia’s broader strategy is to invest in companies that control key layers of the AI infrastructure buildout. Its latest Q4 13F filing shows a portfolio that consists of tech holdings tied to the AI supply chain.
The company’s biggest position is Intel (INTC) at about $7.9 billion at fourth quarter end, followed by Synopsys (SNPS) at roughly $2.26 billion and CoreWeave (CRWV) at about $1.74 billion, according to 13F data tracked by Whale Wisdom.
Related: Nvidia buys $3 billion in under-the-radar tech stocks, exits Arm
Nvidia also holds smaller stakes in Nokia (NOK) and Nebius (NBIS), both valued at roughly $1 billion at the end of 2025.
The latest investment in the two photonics companies is each larger than Nvidia’s stake in CoreWeave and close to the size of its second-largest holding, Synopsys.
“The decision to invest in two optical partners rather than selecting a single source is architecturally deliberate rather than financially redundant,” Burke said. “Coherent and Lumentum occupy complementary positions in the optical value chain.”
