AI Data Center Interconnect Demand Surges: Which Optical Communication Stocks Benefit Most? 5 US Stocks to Watch

Lumentum is becoming one of the faster-growing companies in the current AI optical communication cycle. Its products encompass optical communication components, cloud optical modules, optical circuit switching systems, and high-power lasers required for co-packaged optics.

Lumentum's newly reported revenue for the fourth quarter of fiscal 2026 reached $1.006 billion, up 109.3% year-over-year, with non-GAAP earnings per share of $3.23. The company projects first-quarter fiscal 2027 revenue to reach $1.225 billion to $1.275 billion, indicating that demand for high-speed optical communications continues to grow rapidly.

More importantly, Lumentum management explicitly stated that as AI computing workloads demand higher speeds and bandwidth, data center architecture is shifting toward optical connectivity. The company is advancing 1.6T-related products and expanding its footprint in optical connectivity solutions.

Lumentum's strength lies in its core optical communication components and laser technology, giving it greater sensitivity to shifts in high-speed optical interconnect demand compared to pure-play data center equipment manufacturers.

However, LITE has become a closely watched AI infrastructure stock, with high volatility in its share price and valuation. Consequently, any moderation in high-growth expectations could exert significant valuation pressure.

Coherent is one of the photonics companies with the broadest business scope among these five companies, with products spanning optical communications, lasers, optical modules, and other photonic technologies.

The company's revenue reached $2.05 billion in the fourth quarter of fiscal 2026, up 34% year-over-year, with a GAAP gross margin of 38.5% and a non-GAAP gross margin of 40.2%. The company stated that AI data centers are transitioning from copper connections to optical interconnects, and Coherent's comprehensive photonics portfolio and manufacturing scale position it well to capture this long-term demand.

In the preceding third quarter of fiscal 2026, Coherent's Data Center and Communications business grew 41% on a pro forma basis, accounting for 75% of total revenue, demonstrating that AI data centers have become a major growth engine for the company.

Coherent's advantages lie in its comprehensive product line, broad customer reach, and strong mass production capabilities. The company is poised to benefit not only from demand for 800G and 1.6T optical modules, but also from supplying lasers and other upstream optical components.

In addition, Coherent has entered into a strategic collaboration with Nvidia to jointly develop advanced laser and optical networking products for next-generation AI data center architectures, further bolstering its position in the AI optical interconnect value chain.

If Lumentum and Coherent lean more toward being large-scale optical communications suppliers, Applied Optoelectronics is a high-speed optical module company offering higher elasticity.

AOI's revenue for the second quarter of 2026 reached $191.9 million, up approximately 86% year-over-year, marking its fifth consecutive quarter of record revenue. More notably, shipments of the company's 800G products more than doubled quarter-over-quarter, and the company indicated that customer demand for 800G and 1.6T products remains robust, with demand expected to potentially exceed existing capacity through mid-2027.

The company had also previously secured a $71 million 800G order from a major hyperscale cloud customer, bringing cumulative orders from this customer to $124 million since mid-March.

In March this year, AOI further announced its first volume order for 1.6T data center optical modules from a long-standing, major hyperscale customer, demonstrating that the company has entered the commercialization phase for next-generation high-speed interconnect products.

To meet demand, the company launched an expansion of its Pearland, Texas manufacturing facility in July this year, adding nearly 400,000 square feet of capacity focused primarily on scaling up 800G and 1.6T optical module production.

AAOI's greatest appeal lies in its high growth and high elasticity, but its risks are also noticeably higher than those of LITE and COHR. The company is smaller in scale and is still in the phase of capacity expansion and profitability improvement; therefore, should customer orders, product pricing, or capacity ramp-up fall short of expectations, stock price volatility could be severe.

Credo is not a traditional pure-play optical module company. Its core business includes active electrical cables, connectivity chips, and digital signal processors, while it is also expanding its footprint in optical interconnect products. The company's primary advantage lies in resolving high-speed data transmission issues both within and between AI server racks through low-power connectivity solutions.

In the first quarter of fiscal 2027, Credo's revenue reached $479 million, representing a year-over-year increase of 114.7%; its non-GAAP gross margin stood at 68%, and adjusted net income reached $236.3 million. The company expects next quarter's revenue to rise further to between $525 million and $535 million.

Credo stated that its products cover transmission distances ranging from millimeters to kilometers, spanning both copper and optical connectivity solutions. As the scale of AI clusters expands, the company is expected to continuously benefit from the demand for high-speed, low-power, and highly reliable data transmission.

Compared with traditional optical module vendors, Credo enjoys higher gross margins and has built strong competitiveness in the markets for active electrical cables and high-speed connectivity chips. However, the company's valuation is typically higher than that of traditional optical communications firms, and a portion of its revenue depends on a few major cloud computing customers. Customer concentration and changes in product mix could trigger significant volatility in its financial performance and stock price.

Ciena is geared more toward networking equipment and optical networking systems rather than being a pure optical transceiver manufacturer. The company provides high-speed optical networking, data center interconnect, and network infrastructure solutions, positioning it to benefit from network upgrades both between AI data centers and within large computing clusters.

In its latest report for the third quarter of fiscal 2026, Ciena generated $1.67 billion in revenue, up 37% year-over-year, with cloud service providers accounting for 53% of total revenue, representing an 82% year-over-year increase. The company stated that AI infrastructure is driving cloud vendors to expand network investments, while high-speed optical networking products such as WaveLogic continue to grow.

Among these, revenue from Ciena's pluggable products more than doubled year-over-year, with shipments of products such as 800ZR continuing to rise. The company also secured optical module orders from major hyperscale customers and won new high-density photonic architecture projects.

Therefore, unlike LITE and COHR, CIEN is not simply betting on a single type of optical transceiver, but is directly involved in building data center optical networks and long-haul interconnect infrastructure.

In terms of direct exposure to the AI optics business, Lumentum aligns most closely with the main investment theme of this round of high-speed optical interconnects. Its revenue growth rate exceeds 100%, with 1.6T, optical circuit switching, and high-power lasers all in expansion phases. Furthermore, its partnership with Nvidia enhances long-term order visibility.

For investors placing greater emphasis on business coverage, revenue scale, and long-term stability, Coherent may present a relatively balanced choice among the five companies. Although its growth rate trails behind LITE and CRDO, its product portfolio is more comprehensive, backed by manufacturing capacity capable of meeting large-scale customer demand.

Credo boasts the highest non-GAAP gross margin among the five companies and has established a strong position in the AI intra-rack high-speed interconnect market, showcasing outstanding operational quality. However, it is not a pure-play optical module company, and its relatively high valuation along with customer concentration could amplify performance volatility.

AAOI is suitable for high-risk investors focused on 800G and 1.6T shipment growth. The company's orders and revenue have entered a period of rapid expansion; however, whether it can smoothly achieve capacity ramp-up, improve gross margins, and achieve sustained GAAP profitability remains key to its stock performance. Ciena, meanwhile, offers a different investment avenue. Its primary opportunities stem from AI-driven data center interconnects and optical network upgrades, featuring a larger revenue base, though its short-term elasticity is typically weaker than that of smaller optical module companies.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.