AI’s Big-Name GPU Boost Gets Attention, but Optical Networking Specialist Coherent Is Getting a Bigger Share of the Spotlight

NVIDIA continues to dominate headlines about artificial intelligence infrastructure, but investors have increasingly been looking at the “picks and shovels” behind the chips. A recent market report highlighted Coherent (COHR), an optical networking and photonics company, as the bigger AI surprise over the past year as its shares rose more than 400% while NVIDIA’s gain was closer to 50%.

Coherent’s core business centers on converting electronic indicates into light for transmission over fiber networks. In the report’s framing, the shift away from traditional copper wiring is being driven by speed limits and heat concerns as cloud infrastructure and AI workloads expand. The company’s optical business is described as its main growth engine, with other activities such as manufacturing lasers positioned as smaller contributors to growth.

Financial performance has also helped support the re-rating. Coherent’s 2025 annual report says revenue increased 23% to $5.81 billion for the year ended June 30, 2025. It attributes the increase largely to communications demand, including datacom growth linked to strong AI datacenter activity, along with higher demand in data center interconnect and telecom transport markets. Networking segment profit rose sharply as well, reflecting the company’s mix shift toward communications-driven revenue.

Part of the market’s attention is tied to NVIDIA’s expanding involvement in advanced optics. In a March 2, 2026 announcement, NVIDIA and Coherent said they entered a multiyear, nonexclusive strategic agreement aimed at advancing advanced optics technologies that support next-generation AI infrastructure. The deal includes a multibillion-dollar purchase commitment, future access and capacity rights for advanced laser and optical networking products, and a $2 billion investment by NVIDIA in Coherent to deepen research, expand capacity, and support U.S.-based manufacturing.

The same NVIDIA announcement framed optical interconnects and advanced package integration as foundational to the next phase of AI infrastructure, emphasizing higher bandwidth and energy efficiency for connectivity across AI “factories.” NVIDIA CEO Jensen Huang said the company is pioneering next-generation silicon photonics with Coherent to enable AI infrastructure at scale, while Coherent CEO Jim Anderson called Coherent a key enabler of next-generation AI data center infrastructure, including an expansion of a long-running relationship.

The market report also points to the next wave of faster optical technology as a growth driver for Coherent. It cites ultra-fast optical platforms including 800G, 1.6T, and 3.2T, where “G” and “T” refer to higher per-channel data rates used in datacenter networking. In that view, Coherent’s shift toward these next-generation optical speeds is part of why analysts expect revenue to grow rapidly into the late 2020s, even as the stock’s valuation implies high expectations.

What is still uncertain is how quickly the optical roadmap translates into sustained, company-reported earnings power. Neither the market report nor NVIDIA’s partnership announcement lays out detailed revenue targets, timing schedules by product generation, or specific margins from the optics scaling effort. Until Coherent reports results tied to these product transitions and the partnership’s capacity build-out, investors will be watching whether growth is broad-based across customers and networking tiers, or concentrated in a narrow set of AI datacenter deployments.

For investors and the broader AI supply chain, the near-term focus is likely to stay on Coherent’s earnings updates and commentary about demand and execution as it ramps next-generation 800G through 3.2T-class optics, and on whether NVIDIA’s purchase commitment and capacity access translate into steady order flow. If the company can sustain growth without margin pressure, Coherent’s “optics surprise” could remain more than a one-quarter narrative; if not, the stock’s valuation premium may become harder to justify.