J.P. Morgan has flagged Coherent and Lumentum as more attractive plays for investors who missed the recent rally in optical stocks. The call comes as market concerns over the adoption of co-packaged optics have weighed on the sector, but the firm argues those fears are overblown.
The analyst's upbeat view is rooted in the belief that the transition to co-packaged optics—a technology expected to reshape data center connectivity—will take longer to disrupt current supply chains than many anticipate. This suggests near-term demand for traditional optical components remains robust, benefiting established players like Coherent and Lumentum.
Shares of both companies have already moved higher, partly on the back of broader enthusiasm around AI-driven network upgrades. The sector has seen a surge in interest as hyperscalers invest heavily in infrastructure, though optical stocks have been volatile amid uncertainty about when next-generation architectures will fully take hold.
If co-packaged optics adoption accelerates faster than J.P. Morgan projects, the competitive landscape could shift dramatically, potentially pressuring the very companies now seen as value plays. Investors should weigh the analyst's timeline assumptions against the risk of disruptive technology arriving ahead of schedule.