By Mackenzie Tatananni
Lumentum Holdings and Coherent were among the top performers in the S&P 500 Tuesday, just one day after the stocks were added to the benchmark index during its quarterly rebalancing.
Lumentum surged 7.8% to $785.57, putting shares on pace for a record closing high, according to Dow Jones Market Data. Coherent was up 4.7% at $267.12. Both stocks were heading for their largest same-day percent increase since March 19.
The recent stock moves added to a strong rally in shares of both optical networking companies, whose technology features in artificial-intelligence data centers. Coherent is up 45% for the year, while Lumentum has more than doubled over the same timeframe.
For that, investors can thank the AI infrastructure spending boom. Both companies have benefitted from an acceleration of hyperscaler capital spending that has lifted shares 253% and 1,005%, respectively, over the past 12 months. While companies like Nvidia provide the AI processors, Lumentum and Coherent make the technology that allows chips to communicate with each other.
These momentous gains contributed to an increase in market value that helped them secure their spots in the S&P 500. Lumentum and Coherent were first tapped to join the index at the start of the month, driving shares even higher.
Their inclusion comes more than a decade after Lumentum began trading on the Nasdaq stock market after spinning off from JDS Uniphase, a provider of fiber-optic communication components. The company was carved into two separate entities, Lumentum and Viavi Solutions. The latter is also publicly traded.
Coherent is technically the successor to II-VI Incorporated, which acquired the original Coherent in 2022. The combined company moved its listing from the Nasdaq to the New York Stock Exchange in 2023.
Both stocks got a boost just last week when company representatives presented at the Optical Fiber Communications Conference and Exhibition. Lumentum projected the total addressable market for the optical sector to surpass $90 billion by 2030, implying a 40% compound annual growth rate.
Coherent, meanwhile, said its own serviceable addressable market could stand at more than $70 billion by the end of the decade. The figure includes more than $15 billion from the growth of co-packaged optics.
The resulting excitement helped investors look past ambiguous commentary from Nvidia boss Jensen Huang, who indicated the chip maker would continue to use copper data-transfer cables between most of its processors rather than outright transitioning to optical fiber.
Nvidia's success seems to have played a big role in determining the fates of many of the S&P 500's most recent newcomers. Vertiv Holdings, a member of Nvidia's partner network and co-developer of data-center cooling systems, also joined the index Monday.
Vertiv, too, has seen explosive growth over the past year. It all begs the question whether the index's newest additions can sustain their momentum.
Some on Wall Street certainly think so. BNP Paribas analyst Karl Ackerman predicted Monday that Lumentum would continue to rise as he hiked his price target on the shares to $1,040 from $625. The company will benefit from increased demand for optical transceivers, lasers, and other components, he said.
Yardeni Research President Ed Yardeni, too, sees room for the stocks to rise. "As clusters scale, data transfer speeds are becoming a limiting factor, increasing the importance of optical components and materials," Yardeni wrote. He explicitly named Lumentum and Coherent, along with AXT and Fabrinet, as potential winners.
Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 24, 2026 14:34 ET (18:34 GMT)
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