Photonics still early as light replaces copper
Conviction: 78%
· Horizon: 5Y
· 2026-08-09
Datacenter traffic is forcing copper off the board, and photonics has put in a durable bottom
Anything that still runs over copper is being forced onto light as AI clusters move to 800G and 1.6T. That upgrade cycle is larger than the railroad buildout or the telco shift from copper to fiber, and it is still early. After a crowded-trade washout the group has bounced hard, with leaders such as Coherent, Lumentum and Applied Optoelectronics up roughly 45-75% off the lows, and photonics is already outperforming memory. Relative strength after a capitulation low is the healthy tape you want if the theme has years left to run. Pullbacks of 20-30% in leaders remain add zones rather than thesis breaks.
| Instrument | Side | Target | Reason |
|---|---|---|---|
| LITE | Long | Hyperscalers have no choice but to replace copper with optical as rack and cluster speeds move to 800G and 1.6T. Lumentum sits in the laser and optical-module bottleneck of that forced upgrade, so a multi-year hold should capture one of the largest TAM expansions in communications hardware. | |
| COHR | Long | Coherent is a core merchant supplier of lasers, optics and materials into AI datacenter interconnects. It has already bounced about 45-75% off the lows and has cleared prior technical hurdles, which fits a durable sector bottom rather than a one-day short-covering spike. | |
| GLW | Long | Corning supplies specialty glass and optical fiber into a TAM of about $25.9B and has been the most resilient large-cap in the optics complex. After breaking above the downtrend it has reclaimed the lost channel and is grinding higher, which is the relative-strength profile you want in a multi-year fiber and photonics build. | |
| CIEN | Long | Ciena is the optical network-fabric leader that monetizes the same 800G and 1.6T traffic boom at the systems layer. A breakdown from a bear flag has already been repaired by a reclaim of the downtrend line, putting the stock back on the long side of the upgrade cycle. | |
| AAOI | Long | Applied Optoelectronics is a vertically integrated transceiver name leveraged to 800G and 1.6T datacenter optics. A roughly 50% drawdown from the highs is a classic reset zone, and the subsequent 45-75% bounce with the photonics leadership group argues the low is in. | |
| CRDO | Long | Credo is a connectivity beneficiary of AI cluster scale-up, spanning high-speed electrical and optical links. After an about 25% drawdown from highs it has broken up and out of a descending channel, which re-opens the path toward prior resistance rather than a grind to new lows. |
Sub-1x-sales networking and photonics turnarounds can re-rate as 800G and 1.6T ramp
Several subscale names still trade near or below 1x sales while already owning a path into 800G, 1.6T or datacenter photonics. Adtran is a legacy networking franchise entering high-speed optics through a prior photonics deal. ams-OSRAM is cutting debt, testing with a hyperscaler and now has former NVIDIA photonics leadership. Sivers has a foundry partner that eases the laser-output bottleneck, and LightPath was bought on the dip as channel support held. If those ramps convert, multiples can expand several-fold into 2030.
| Instrument | Side | Target | Reason |
|---|---|---|---|
| AMSSY | Long | ams-OSRAM is a sub-1x sales turnaround that sold non-core assets to cut debt and is pivoting to datacenter photonics with a hyperscaler already in test. Adding the former NVIDIA photonics head raises the odds that the AI-optics pivot is real, which could support a multi-fold re-rate if design wins convert. The OTC listing is illiquid, so this is a multi-year hold, not a trading vehicle. | |
| SIVEF | Long | Sivers supplies lasers that go into photonic systems, and the prior valuation cap was how many lasers the company could actually produce. A new foundry partner changes that capacity constraint. The stock has already cleared earlier hurdles, so the next test is whether bulls can take the downtrend line and the next resistance band. | |
| ADTN | Long | Adtran trades near 1x sales as a leftover networking vendor while a prior photonics acquisition already puts it into 800G and 1.6T optics. That is the same cheap-legacy-into-high-speed-optics setup that re-rated Nokia, and the sales multiple leaves room for a multi-bagger if the optics mix scales. | |
| LPTH | Long | LightPath is an optical-components name that was bought on the dip and is acting well off the bottom of its channel. A break up and through the channel top would confirm the downtrend is finished and keep it in the photonics basket rather than a dead-cat name. | |
| TSEM | Long | Tower is a key foundry for photonic chips, so it monetizes the buildout one layer below the transceiver names. A descending-channel breakout puts the stock back on the long side of that enabling layer rather than in a falling-knife regime. | |
| SOI.PA | Long | Soitec's photonics-SOI wafers sit under transceivers and CPO engines, so substrate bookings are a cleaner read on multi-year optical demand than module inventory. The stock yawned through the sector washout, held the level that needed to hold, and is consolidating before a move higher. |
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