Zacks Investment Ideas feature highlights Lumentum, Coherent and Fabrinet

For Immediate Release

Chicago, IL – December 16, 2025 – Today, Zacks Investment Ideas feature highlights Lumentum LITE, Coherent Corp COHR and Fabrinet FN.

The Best AI Stocks to Buy for 2026

Artificial intelligence is entering a new phase of infrastructure expansion, and one of the most important technologies enabling that growth is photonics. As AI models scale, the limiting factor is no longer pure compute, but the movement of data itself. Copper interconnects are approaching hard physical and power limits, creating a choke point for training and inference workloads.

That’s where photonics comes in. Optical interconnects, silicon photonics, and co-packaged optics are emerging as essential solutions for boosting bandwidth, reducing latency, and lowering power consumption across next-generation data centers. These technologies make it possible to replace traditional copper links with optical I/O running at 400G, 800G, and even 1.6T per port, and ultimately enable chip-to-chip optical fabrics inside AI systems.

For context, these numbers represent the amount of data a single port can move every second, 400, 800, or 1,600 gigabits, which is several times faster than what copper can reliably support. In practical terms, higher-speed optical ports allow GPUs to share information far more quickly, reducing idle time and dramatically improving overall training efficiency for large AI models.

The market opportunity is substantial. Optical interconnects are projected to grow from roughly $16 billion in 2024 to as much as $34–41 billion by 2030. Silicon photonics, a smaller but faster-growing niche, is expected to expand from about $3 billion in 2025 to $12–16 billion by 2032. And data center interconnect spending, directly tied to AI infrastructure, should climb from about $15 billion in 2025 to $26 billion by 2030. All of this is happening within a broader semiconductor cycle that could push total industry revenue toward $1 trillion before the end of the decade.

Against this backdrop, Lumentum, Coherent Corp and Fabrinet occupy strategically important segments of the photonics supply chain and boast top Zacks Ranks. Each stands to benefit from accelerating AI demand, and all three offer compelling setups as the industry shifts toward photonic architecture.

This shift has not gone unnoticed by Wall Street, as investors have begun to rotate into this industry. In the performance chart below, you can see that the last three months for these stocks and the industry have been exceptionally good. That said, this theme has legs which should carry on well into next year.

Lumentum Stock is on Fire

Lumentum manufactures the critical optical components such as lasers, modulators, photodiodes, and full photonic engines that enable ultra-high-speed data transmission in AI data centers, telecom networks, and advanced electronics. The company also supplies 3D-sensing lasers for consumer devices, giving it a diversified but firmly photonics-driven revenue base.

Momentum in the business continues to build. Sales and earnings growth are accelerating, and analysts are steadily raising their forecasts, earning the stock a Zacks Rank #1 (Strong Buy). Over the past 60 days, earnings estimates have moved sharply higher, with current year profit expectations up 11.1% and next year estimates up 13.1%.

Revenue is projected to climb 56% this year and another 31.4% next year, while earnings are expected to surge 163% year over year and grow an additional 41.9% in the following year. Despite a nearly 250% rally year-to-date, the valuation remains reasonable for a company tied directly to one of the fastest niches among the largest technological buildouts in history. Shares trade at about 44x next year’s earnings, which is a premium, but one that reflects Lumentum’s accelerating growth and its increasingly pivotal role in the shift toward optical focused AI infrastructure.

Shares of Coherent Corp Trade at a Reasonable Valuation

Coherent Corp has a compelling setup: a Zacks Rank #1 (Strong Buy), strong sales and earnings momentum, and a valuation that remains reasonable given its central role in the photonics and AI ecosystem. The company produces the lasers, optical components, and photonic modules used in AI data centers, semiconductor equipment, advanced communications, and industrial manufacturing. Its products underpin high-speed optical interconnects and co-packaged optics—two of the most critical technologies enabling the AI buildout.

Analysts have steadily increased their projections over the past two months. Current year earnings estimates are up 11.4%, while next year forecasts have risen 5.1%. Sales are expected to grow 15.1% this year and another 14.5% next year, with earnings projected to rise 44.5% and 24.6% over those same periods.

The stock has been a strong performer, up 93% year-to-date, but even after that run, it trades at roughly 35x forward earnings. That’s elevated, but still reasonable for a company positioned at the center of one of the most important hardware upgrade cycles of the decade.

Fabrinet Shares Gain on Earnings Upgrades

Fabrinet is a high-end contract manufacturer specializing in the assembly and advanced packaging of optical, photonic, and electro-optical components for data center, telecom, and semiconductor customers. The company benefits directly from rising demand for 400G, 800G, and 1.6T optical modules, effectively serving as the volume-scale manufacturing backbone for many of the leading photonics innovators.

Like the other names on this list, Fabrinet is posting strong top- and bottom-line momentum, paired with steady earnings upgrades and a valuation that remains reasonable given its growth profile. The stock carries a Zacks Rank #2 (Buy), supported by upward estimate revisions. Over the past two months, current-quarter earnings estimates have risen 8.7%, while current-year forecasts are up 8.6%.

Sales are expected to increase 28.5% this year and 16.9% next year, while earnings are projected to grow 30.7% and 16.1% over the same periods. Shares have surged 117% year-to-date, yet trade at roughly 35x forward earnings—a premium multiple, but one that aligns with Fabrinet’s consistent execution and long-term track record.

The company has more than proven itself as a disciplined operator, compounding earnings at an impressive 23% annually over the past fifteen years. With a powerful new optics upgrade cycle underway, Fabrinet appears well positioned for continued growth and rising investor interest.

Should Investors Buy Shares of FN, LITE and COHR?

Despite the strong performance year-to-date, the photonics theme still appears early in its broader adoption cycle. Outside of specialists deeply embedded in the semiconductor and networking industries, there has been relatively little mainstream discussion about how critical optical technologies are becoming to AI infrastructure. As Wall Street gains a clearer understanding of this shift, and the scale of the upgrade cycle required, capital is likely to continue rotating into the photonics ecosystem.

Lumentum, Coherent, and Fabrinet each offer exposure to different layers of this buildout, backed by strong estimate revisions, solid growth profiles, and favorable Zacks Ranks. If AI data centers continue moving toward optical-first architectures, these companies stand well positioned to benefit from what could be a multi-year demand tailwind.

Why Haven't You Looked at Zacks' Top Stocks?

Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.

Today you can access their live picks without cost or obligation.

See Stocks Free >>

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

[email protected]

https://www.zacks.com

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research