Morgan Stanley Views Lumentum (LITE) Positively on Optical Markets Growth Potential

Lumentum Holdings Inc. (NASDAQ:LITE) is one of 15 stocks with the biggest hedge fund momentum, after gaining 26 hedge fund holders during the fourth quarter of 2025. On February 23, Morgan Stanley increased the price target on Lumentum Holdings Inc. (NASDAQ:LITE) to $520 from $420, while retaining the stock’s Equal Weight rating, citing the increasing speed of investment in AI data centers.

According to Morgan Stanley analysts, optical markets are set to grow to more than $65 billion by 2028 from about $30 billion in 2025. Morgan Stanley also projects the addition of $23 billion to the total addressable market for optical products from companies like Lumentum Holdings Inc. (NASDAQ:LITE), driven by the anticipated adoption of new optical technologies as traditional networks reach their limits. The analysts’ price target change followed a similar action from Mizuho, which also increased its price target on Lumentum Holdings Inc. (NASDAQ:LITE) to $645 from $525 on February 17, while retaining the stock’s current Outperform rating.

Lumentum Holdings Inc. (NASDAQ:LITE) provides optical and photonic products. It operates through two segments: Cloud and Networking, which deals with optical and photonic components, modules, and subsystems, and Industrial Tech, which includes solid-state lasers, kilowatt-class fiber lasers, ultrafast lasers, diode lasers, and gas lasers.

While we acknowledge the potential of LITE as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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