Key insights
- Rothschild highlights Lumentum, Coherent, and Celestica as key AI networking stocks poised to benefit from increased demand for optical components and data infrastructure. NVIDIA's $2B investments in Lumentum and Coherent signal strong growth potential. Celestica's customized Ethernet switching revenues are also expected to rise significantly due to hyperscalers' increased capital expenditures, suggesting a bullish outlook for these stocks and the broader AI networking sector.
Investing.com -- Rothschild has identified the leading stocks in the AI networking sector, highlighting companies positioned to capitalize on growing demand for optical components and high-speed data transmission infrastructure. The rankings focus on firms benefiting from capacity expansions and major technology partnerships.
The AI networking sector encompasses companies manufacturing critical components for data center connectivity, including optical transceivers, laser systems, and Ethernet switching equipment. These components are essential for handling the massive data flows required by artificial intelligence applications.
- Lumentum - Lumentum’s core business centers around the manufacturing of laser components as well as finished products such as optical transceivers. This core business will benefit from the approximately 80% in additional capacity that Lumentum is bringing online over the next 18 months. Further capacity expansion has been made possible by NVIDIA’s recent $2 billion investment.
In recent news, Lumentum Holdings reported third-quarter earnings and revenue that surpassed analyst expectations. BofA Securities also raised its price target on the company, citing an improved margin outlook.
- Coherent - Coherent, like Lumentum, is well positioned to benefit from surging demand for optical transceivers as well as additional revenues from both CPO and OCS. Also like Lumentum, Coherent has recently benefited from a $2 billion investment from NVIDIA.
Coherent Corp. announced advancements in its silicon carbide technology for AI data centers. The company also received a price target increase from Stifel and was initiated with a Buy rating by Rothschild Redburn.
- Celestica - Celestica’s revenues are growing at over 50%, driven by its rising share of customized Ethernet switching. Its near-term switching revenues will be bolstered further by hyper-scalers’ significant capex increases in FY26. This is translating into, for instance, a recent contract win at a hyper-scaler for a 1.6Tbps CPO Ethernet switch.
Celestica Inc. announced that its new 1.6TbE AI data center switches are now available for order. Several firms, including Aletheia Capital and CIBC, also raised their price targets on the company.
- Credo - Credo’s core business is the supply of AEC cables. Rothschild believes the market has taken too binary a view on how the reducing applicability of AEC will impact Credo’s revenues.
A recent development for Credo Technology Group is its agreement to acquire DustPhotonics, a developer of Silicon Photonics technology. Following the news, both Jefferies and Mizuho raised their price targets on the company.
The rankings reflect Rothschild’s assessment of companies positioned to serve the expanding AI infrastructure market, with particular emphasis on those securing major investments and capacity expansions.
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