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This Week's Bonus Article
Lumentum's 1,500% Run and Nvidia's $2 Billion Deal: What Comes Next?Authored by Chris Markoch. Article Published: 4/9/2026. 
Key Points
- Lumentum surged by more than 1,400% as AI infrastructure demand drove momentum and led to its S&P 500 inclusion.
- A $2 billion partnership with NVIDIA positions the company at the center of next-gen optical networking.
- Despite strong catalysts, valuation, short interest, and capacity constraints suggest patience may be warranted.
- Special Report: Elon’s “Hidden” Company
Investors may not have heard much about Lumentum Holdings Inc. (NASDAQ: LITE) in the mainstream financial press in 2025, but that’s changing. LITE is up more than 1,500% in the last 12 months, and two newsworthy catalysts are making the company hard to ignore as part of the ongoing artificial intelligence (AI) trade. Founded in 2015 as a spinoff from JDS Uniphase, Lumentum makes optical and photonic products used in telecommunications, 3D sensing and, increasingly, data center infrastructure. The company spent years as a relatively quiet supplier to the tech industry—known inside the sector but rarely a headline name. That era appears to be over. Lumentum Rhymes With MomentumIt’s a coincidence that Lumentum rhymes with momentum, but that’s exactly what the stock was quietly building in 2025. That momentum turned into a breakout in 2026: LITE has climbed about 140% year to date.
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Part of that rise reflected anticipation of inclusion in the S&P 500 index, a distinction announced on March 10. Inclusion itself doesn’t change a stock’s fundamental valuation. And unlike the case of Palantir Technologies Inc. (NASDAQ: PLTR), index admission didn’t materially increase institutional ownership of LITE—over 94% of the stock’s float was already held by institutions. The more significant catalyst was the announcement of a partnership with NVIDIA (NASDAQ: NVDA) to accelerate innovation in advanced optics technologies. NVIDIA will pay Lumentum $2 billion, which exceeds the company’s entire revenue for its 2025 fiscal year. Why NVIDIA Is Betting on LumentumInvestors may be suffering data-center fatigue, reflected in many technology stocks that have plunged on concerns the buildout may not meet expectations. But Lumentum occupies the photonics market, which is forecast to grow at a compound annual growth rate (CAGR) of 6.6% through 2030. Photonics involves connecting data center components with light, which can transmit signals faster and, importantly, generate less heat. Copper remains the current standard because it’s cheaper than optical equipment, so it will likely remain widely used. Still, a global copper shortage has opened the door for photonics companies to gain share. For NVIDIA, the partnership is less about immediate necessity and more about positioning for the future. As AI clusters scale to hundreds of thousands of GPUs, the bandwidth and thermal limits of traditional copper interconnects become increasingly difficult to manage. By forging a deep relationship with one of the most capable optical component makers, NVIDIA is effectively hedging against infrastructure constraints that could slow AI buildout. For Lumentum, the $2 billion commitment provides capital to expand manufacturing capacity and accelerate R&D at a pace that would have been difficult to fund organically. A Trend Reversal Worth WatchingWhile inclusion in the S&P 500 won’t immediately alter institutional investor behavior, it can affect sentiment. Over the past two quarters institutions have been net sellers of LITE—not necessarily a repudiation of the business model, but an acknowledgment that the stock may have been running ahead of fundamentals. Now that Lumentum is part of the S&P 500, many index funds will be required to hold LITE. That demand may not change the company’s long-term outlook, but it could help establish a higher near-term floor for the stock. Traders May Want to Wait for a PullbackThe LITE chart shows investors buying in anticipation of the company’s S&P 500 debut. The stock rallied between March 10, when inclusion was announced, and March 23, when it began trading as part of the index.  However, some gains were driven by short-covering. LITE carries short interest of roughly 16%. That’s not exceptionally high in absolute terms, but it is elevated on a historical basis and was rising as the stock began its strong run. The sharp appreciation has also pushed the stock's valuation to lofty levels even by technology sector standards. LITE may need another catalyst to move materially higher. Investors are likely focused on the company’s Q3 fiscal 2026 earnings report, scheduled for May 5. At that time, shareholders will want confirmation of improvements in manufacturing capacity, which was constrained in the prior quarter. Retail investors may wonder whether the stock’s extraordinary run has already priced in the good news. The bull case argues the NVIDIA partnership and S&P 500 inclusion are the start of a longer re-rating. But given constrained capacity, elevated short interest and a stock that has already made an extraordinary move, patience may be the most prudent position right now. The May earnings report should offer the clearest read yet on whether Lumentum's fundamentals are catching up to its market price. |
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