The era of CPO has begun! The bull market drama of "AI super mega stock" Lumentum (LITE.US) is far from over.

The most core participant in the "Alphabet Inc. Class C TPU AI Calculation Chain" is also an indispensable optical module component supplier for the "NVIDIA Corporation AI GPU System" Lumentum (LITE.US). Since announcing strong quarterly performance and future prospects, the bullish sentiment towards the company's stock price has continued to rise among Financial Institutions, Inc., continuing the bullish trend into 2025. Lumentum's stock price has risen by up to 340% for the year, making it an undeniable "super stock" in the global stock market's AI calculation power theme. The stock price has already risen by over 56% this year. This US-based leader in optical module technology is considered one of the strongest beneficiaries in the potential long-term battle between "Alphabet Inc. Class C TPU vs NVIDIA Corporation GPU". Whether the two sides are evenly matched or one side achieves absolute dominance, it is beneficial for the optical module theme in the long run. Senior analyst Jeff Pu from GF Securities stated in a recent research report that Lumentum will continue to benefit from the trend of accelerated use of Co-Packaged Optics (CPO) by the "AI chip superpower" NVIDIA Corporation (NVDA.US). In the latest earnings report released last week by Lumentum, strong demand in the Optical Cross-connect Switch (OCS) and Co-Packaged Optics (CPO) areas led to revenue and actual profit that exceeded expectations, as well as guidance for the next quarter showing an 85% year-on-year increase. This demonstrates the company's key position in the global AI calculation power infrastructure. In the quarter ending December 27, 2025, Lumentum's net revenue reached $6.655 billion, a staggering 65.5% year-on-year increase, reaching the high end of the guidance range; for the next quarter, Lumentum's management provided guidance well above market expectations, with expected revenue reaching $7.8-8.3 billion, implying a year-on-year increase of over 85%, and a quarter-on-quarter growth of approximately 22%, showing continued strong growth momentum. Analyst Jeff Pu of GF Securities wrote in his report to clients, "At the 2025 GTC conference, NVIDIA Corporation launched its CPO-based switch, Quantum-X, scheduled for the second half of 2025, while Spectrum-X is planned for the second half of 2026." He said, "NVIDIA Corporation's first-generation scale-out CPO switch Quantum-X uses a pluggable architecture, rather than fully integrated Co-Packaged Optics technology. For the 2026 GTC, we believe NVIDIA Corporation may introduce a new generation of CPO switches. We expect this generation to have a performance of 115.2T, and Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR is likely to lead in core chipsets related to Co-Packaged Optics (CPO). We believe the supply chain will gradually accelerate expansion starting in the second quarter of 2026 and accelerate in the second half of 2026/2027. We have raised our estimates for NVIDIA Corporation scale-out CPO switches, expected to be 2k/20k/80k in 2025/2026/2027, respectively." GF Securities analyst Pu stated that Lumentum should benefit from the continuous surge in demand for continuous wave lasers from the demand side, while another North American optical module giant, Coherent (COHR.US), is relatively "neutral". "According to the recent earnings call, Lumentum emphasized that optical scale-up expansion is a long-term structural opportunity, which is expected to begin by the end of 2027," added Pu. "We believe that NVIDIA Corporation may consider launching CPO/NPO from the second half of 2027, starting with the Rubin Ultra architecture, and the interconnection field from rack to rack may actively turn to CPO technology or NPO-based optical interconnection. We believe that Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's Co-Packaged Optics (CPO) technology scale-up solution has entered the sampling stage, but the situation of mass production readiness is still uncertain, indicating that the debate between NPO and CPO will continue." The earnings report released by Lumentum last week shows that the company is still in the early stages in the OCS and CPO fields, with significant growth potential in the future as production capacity ramps up and orders are delivered, along with stable demand growth from traditional telecom and industrial manufacturing markets. Lumentum has established a strong growth tone for the whole year and is expected to continue to benefit from the wave of AI infrastructure construction. The company's management stated that in the CPO business, the company has received an incremental order of hundreds of millions of dollars this quarter, and the products will be delivered in the first half of the calendar year 2027. Lumentum CEO Michael Hurlston stated, "We are at the starting line of two huge opportunities: Optical Cross-connect Switch (OCS) and Co-Packaged Optics (CPO)." He emphasized that with the explosive growth in bandwidth and energy efficiency requirements for AI data centers, Lumentum is experiencing its strongest growth cycle in history. After Lumentum announced its earnings, Wall Street financial giant Morgan Stanley expressed excitement about the substantial progress the company has made in the emerging CPO market. Based on strong fundamental expectations, Morgan Stanley has significantly raised its future profit forecasts for Lumentum. Analysts at Morgan Stanley expect Lumentum's earnings compound annual growth rate (CAGR) to reach an astonishing 158% from the fiscal year 2025 to the fiscal year 2027. Lumentum vs Coherent Lumentum is more like a manufacturer of key components in optical communications (lasers, optical device suppliers). It also ships some optical module products and subsystems, but its core technological advantage lies in its ability to independently build the most basic light sources and high-speed device platforms, components that are heavily integrated into various optical modules and optical communication systems in large AI data centers. Coherent, on the other hand, leans more towards being a vertically integrated manufacturer from raw materials to final modules. It not only produces lasers and photonics devices but also has stronger capabilities in whole-module supply, material production, making it more advantageous in some high-speed module markets with higher integration levels. The core of Lumentum's business is the design and manufacture of key components for optical communication and photon products, including lasers, optical transceivers, modulators, optical amplifiers, wavelength management devices, and other fundamental components, which are the "building blocks" of optical modules and optical systems. Its product line includes optical fiber communication components used in data centers and cloud networks, as well as lasers for industrial, 3D sensing, and manufacturing applications. Lumentum's lasers (such as EML, CW lasers, DML, etc.) are the core light sources in optical modules and silicon interconnects, and these light sources are integrated into the final products of many OEM optical modules. Therefore, Lumentum's core competitiveness lies in light sources and key photon components, making it the top priority supplier for high-performance network architectures in the AI calculation power industry chain with Alphabetic Inc. Class C TPU and NVIDIA Corporation GPU, which is different from traditional companies like Coherent that only do whole modules. Coherent is often seen in the industry as a vertically integrated supplier of optical communication and laser platforms: it has its own InP/GaAs wafer manufacturing capabilities and can integrate upstream optical chips, downstream packaging, and module integration into the final optical module products. This gives it a stronger supply capability "from parts to finished products" in some high-speed modules (such as 800G / 1.6T complex modules), with its core lying in its whole-module supply capability. Lumentum is seizing the AI infrastructure dividend! Regardless of whether NVIDIA Corporation GPU or Alphabetic Inc. Class CTPU has the technological advantage, it can continue the bullish trend. The reason why Lumentum's stock price trend in 2025 has been bullish to the extreme is mainly due to the fact that Lumentum can benefit from both the Alphabet Inc. Class C TPU AI Calculation Chain and the NVIDIA Corporation-led AI GPU System. The TPU and GPU calculation groups in AI superclusters both share a common core characteristic: the need for extremely high bandwidth, very low latency, and high energy efficiency in internal data center interconnection. Traditional copper cables or electronic exchange solutions cannot meet the demand when expanding to thousands or even tens of thousands of chips due to the explosive increase in power consumption and heat loss; optical interconnection technologies (including Co-Packaged Optics CPO, silicon photon switch, optical cross-connect OCS) can use light signals instead of electrical signals to significantly increase bandwidth density and energy efficiency in large-scale AI training/inference networks, reduce latency and power consumption, which is a common demand for larger optical interconnect capacity in GPU and TPU clusters. For example, NVIDIA Corporation's Spectrum-X/Quantum-X silicon photon network switches explicitly integrate laser and photon technology to improve power efficiency and network capacity, with Lumentum's high-performance lasers and optical components being an essential part of these switches. In the Jupiter/AI data center network system of Alphabet Inc. Class C, Optical Cross-connect Switches (OCS) clusters have been extensively embedded in the architecture to support TPU AI systems and large-scale training/inference systems. Lumentum's OCS products like the R300/R64 are specifically aimed at "large-scale cloud computing + AI/ML data center networks": using MEMS optical routes to directly establish optical connections between endpoints, bypassing intermediate electronic exchanges and OEO conversion, emphasizing high port counts, low latency, and low power consumption. From a technical perspective of AI data centers, whether it is NVIDIA Corporation InfiniBand with Spectrum-X/Ethernet, or Alphabet Inc. Class C optical cross-connect OCS, both are exploring the era of Co-Packaged Optics (CPO) to reduce latency and power consumption by integrating photon elements. These systems require a large number of high-performance light sources, lasers, optical switches, and high-density optical interconnect modules for the generation, transmission, and switching of light signals. Lumentum has deep technical expertise in these cutting-edge optical communications hardware (efficient lasers, optical switching devices, module design, etc.), allowing it to be a foundation supplier for optical layers in multiple high-performance AI network architectures. In the medium to long-term technical evolution, both large-scale training in AI (whether in large-scale GPU factories or TPU supercomputers) face similar bottlenecks: network wiring costs, system interconnection scalability, efficiency, and bandwidth requirements. Industry analysis indicates that optical cross-connects (OCS) and CPO and other optical interconnect technologies are transitioning from small-scale experiments to large-scale deployments and may become standard infrastructure for AI data centers. Lumentum has long-standing technical accumulation in these cutting-edge optoelectronic components (efficient lasers, optical switching devices, module designs, etc.), enabling it to provide critical optical components for different AI network architectures (such as NVIDIA Corporation InfiniBand + Spectrum-X/Ethernet or Alphabet Inc. Class C optical cross-connect OCS), benefiting from the expansion and upgrade of these two major calculation paths.