Optical stocks give back gains after a historic run as investors reassess sky-high valuations and AI monetization doubts creep in
The AI hardware trade, which minted some of the most spectacular stock gains of the past year, is showing signs of exhaustion. Lumentum fell roughly 8% and Coherent dropped approximately 9% on June 23-24, 2026, part of a broader rout across optical and photonics names tied to AI data center buildouts.
Applied Optoelectronics joined the selloff, falling around 13% over the same stretch.
How high they flew #
Lumentum shares had climbed over 1,000% in the 12 months before the pullback. That is not a typo.
The engine behind those gains was straightforward: AI data centers need enormous amounts of optical networking components to move data at the speeds modern AI workloads demand. Companies like Lumentum and Coherent supply exactly those components, and investors bid their shares up accordingly.
Nvidia added rocket fuel to the rally by committing $2 billion each to Coherent and Lumentum in 2026. Coherent’s datacenter revenue grew 41% year-on-year.
What triggered the selloff #
Investor Leopold Aschenbrenner’s fund disclosed its exit from positions in both Lumentum and Coherent during Q1 2026. Those disclosures correlated closely with sharp single-day moves, with Lumentum down as much as 11% and Coherent falling around 6-7% on separate selloff days before the broader June decline.
There is also a specific technical risk hanging over this space. Nvidia’s investment in optical interconnects was partly a bet against copper as a competing technology for linking chips inside data centers. If copper interconnects close the performance gap faster than expected, the addressable market for optical components could shrink at the margin.
What investors should watch #
The June pullback fits a pattern that has repeated itself in 2026. May saw its own corrections in these names, also attributed to valuation concerns after massive prior gains.
Nvidia’s $2B commitments to both companies create an interesting dynamic. They signal deep strategic alignment with optical interconnects as a long-term technology, but also represent a level of customer concentration that makes investors nervous. If Nvidia’s own spending priorities shift, Lumentum and Coherent feel it immediately.
Institutional sentiment is the variable worth tracking most closely from here. Aschenbrenner’s fund was not the only sophisticated money that built large positions during the run-up.
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