Why Lumentum (LITE) Could Benefit From AI Optical Networking Demand as Co-Packaged Optics Adoption Accelerates

Lumentum Holdings Inc. (NASDAQ:LITE) is one of the best performing AI stocks over the last 3 years, with a 3Y CAGR of 143.31%. On June 11, JPMorgan analyst Samik Chatterjee reiterated an Overweight rating and maintained a $1,130 price target, arguing that the recent pullback in optical-networking stocks had created a buying opportunity.

Chatterjee said Lumentum shares had fallen about 15% from their early-June high as investors worried about limited summer catalysts and possible delays in co-packaged optics adoption. He pushed back on those concerns, citing supply-chain checks indicating that Nvidia’s large-scale CPO rollout remained on track and may be ahead of schedule. JPMorgan also pointed to growing interest from cloud-service providers and other customers, which could broaden demand beyond Nvidia.

Co-packaged optics places optical engines close to switch chips to increase bandwidth while reducing power consumption in large AI systems. JPMorgan viewed Lumentum’s valuation of roughly 25 times estimated 2028 earnings as reasonable, given projected annual earnings growth above 40%. The thesis still depends on deployment schedules, customer concentration and Lumentum’s ability to convert product demand into sustained shipments and earnings growth.

Lumentum Holdings Inc. (NASDAQ:LITE) develops optical and photonic technologies for AI and cloud networking, telecommunications, industrial manufacturing and sensing, including lasers, components, modules and optical subsystems.

While we acknowledge the risk and potential of LITE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LITE and that has 10,000% upside potential, check out our report about the cheapest AI stock.

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