Photonics and optical interconnect megatrend
Conviction: 72%
· Horizon: 5Y
· 2026-07-16
Data-center and networking copper links must be replaced by light, creating a multi-year photonics and optical-interconnect supercycle.
Bandwidth, power, and density limits force copper off high-speed paths toward 800G and 1.6T optics. That replacement cycle is structural and still early relative to the eventual TAM, so leaders and turnarounds in photonics, optical interconnect, and related networking should re-rate over a multi-year horizon even after a crowded-trade drawdown.
| Instrument | Side | Target | Reason |
|---|---|---|---|
| LITE | Long | Copper-to-light replacement in high-speed interconnect is still early and should compound for years as anything over copper is forced onto optical paths. Multi-year winners in that stack can still deliver outsized returns from current levels once the group bottoms. | |
| ADTN | Long | A legacy networking franchise trading near 1x sales is entering 800G and 1.6T optics through a prior photonics acquisition. That mix shift into high-growth optical can support a multi-bagger re-rating if the optical product cycle scales. | |
| LTPH | Long | Optical interconnect exposure with a path from roughly $60M sales toward $400M into 2030 at about a $1B market cap leaves room for further re-rating if growth materializes. The setup favors patient accumulation on dips rather than chasing tops of channels. | |
| AMSSY | Long | A turnaround focused on datacenter photonics, with non-core asset sales to cut debt, a hyperscaler partner in testing, and valuation under 1x sales, can re-rate sharply if design traction sticks. Former NVIDIA photonics leadership joining reinforces the strategic pivot, though OTC liquidity makes this a multi-year, low-liquidity position. |
Photonics leaders are in a crowded-trade washout; 20–30% drawdowns in better charts are accumulation zones, not theme invalidation.
The group’s bounce failed as a dead-cat move and bottoms are not confirmed, so many names stay dangerous until channels or downtrend lines are reclaimed. Still, the theme remains early-inning; leaders off roughly 20–30% from highs with better relative strength are preferred adds once support holds or breakouts clear resistance, rather than abandoning overweight exposure.
| Instrument | Side | Target | Reason |
|---|---|---|---|
| GLW | Long | Specialty glass and optical fiber sit on a large multi-tens-of-billions TAM and have held up better than most pure photonics names through the sector bloodbath. Relative resilience plus core optical-fiber exposure keeps it a higher-quality way to stay long the copper-to-light buildout while charts stabilize. | |
| MXL | Long | Relative strength versus weaker photonics names plus 20–30% drawdowns from highs often marks gift zones in a multi-year theme. Near channel-bottom and moving-average confluence, patient adds make more sense than chasing failed breakouts. | |
| COHR | Long | After about a 25% drawdown, earlier base and uptrend-line confluence caps downside risk versus upside if the optical cycle resumes. Adds prefer a retest of that support or a clean reclaim of the downtrend line above. | |
| CRDO | Long | A bullish descending-wedge setup with moving-average and trendline confluence after roughly a 25% drawdown from highs frames defined risk. Preferred entries are at that confluence or on a confirmed break up and out of the wedge. |
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