Lumentum surges 10% as AI data center fiber demand fuels rally

Lumentum Holdings Inc. shares jumped as much as 10% at the open on Wednesday, extending a rally driven by surging demand for fiber-optic components used in AI data centers. The stock traded at $98.42, its highest level in three months.

"The shift from copper to fiber optics inside AI data centers is happening faster than anyone expected," Michael Hurlston, chief executive officer of Lumentum, said in a June 9 interview on "The Rundown." He described the company's laser technology as "arguably second to none," citing decades of experience positioning the California-based firm for the AI infrastructure buildout.

Lumentum provides optical and photonic products for cloud networking and industrial applications. The company has benefited as data center operators push connectivity speeds from 400 Gbps to 800 Gbps and now 1.6 Tbps, requiring advanced indium phosphide lasers that Lumentum specializes in producing. Hurlston said supply, not demand, is the primary constraint, with new fabrication facilities taking about two years to reach production. He noted that Nvidia Corp. has made a multiyear purchase commitment reflecting concerns over indium phosphide laser availability.

The optical rally comes as the broader semiconductor sector gains momentum. Broadcom Inc. earlier this week announced a deal to develop custom application-specific integrated circuit chips for Apple Inc.'s future products, underscoring the appetite for specialized silicon. Lumentum's surge signals that investors are betting on the physical layer of AI infrastructure — the fiber cables and lasers that move data between tens of thousands of accelerators inside next-generation data centers. Hurlston said he sees "no end in sight" over the next five years, with co-packaged optics and growing fiber use as long-term growth drivers.

Lumentum shares have gained about 35% year to date, outpacing the Philadelphia Semiconductor Index's 22% advance. The company reports fiscal fourth-quarter results in August, with analysts projecting revenue of $420 million, according to data compiled by Bloomberg.

This article is for informational purposes only and does not constitute investment advice.