Photonics shares are providing a solution to one of the biggest challenges facing the increased adoption of artificial intelligence: power consumption.
Copper interconnects, which have handled this work for decades, are power-hungry and distance-limited above 800G, pushing hyperscalers towards optical alternatives that use light and lasers to save electricity and deliver more efficient computing power.
We look at three Photonics stocks at the forefront of the industry:
- Applied Optoelectronics (NASDAQ: AAOI)
- Credo Technology (NASDAQ: CRDO)
- Lumentum (NASDAQ: LITE)
Applied Optoelectronics
Applied Optoelectronics (NASDAQ: AAOI) is a transceiver specialist. Its edge is vertical integration: it designs and fabricates its own indium phosphide (InP) lasers in Sugar Land, Texas, then assembles them into the pluggable modules that slot into AI switches.
US-based laser manufacturing is becoming increasingly strategic as hyperscalers seek supply chains outside China, and Applied Optoelectronics is perfectly positioned.
In March, it landed a first 1.6T volume order worth more than $200 million from a long-standing hyperscale customer, followed in April by an upsized 800G order that took total commitments from a second hyperscaler to $124 million.
The firm posted record full-year 2025 revenue of $455.7 million, up 83% year-on-year, with management guiding for more than $1 billion in 2026.
The shares have tripled this year on the back of it, reflecting a company that has shifted from an optical component also-ran to a front-row AI infrastructure supplier in the space of 12 months.
Credo Technology
Credo Technology (NASDAQ: CRDO) operates the connectivity layer. This is the plumbing that actually moves bits around an AI cluster.
Its active electrical cables, retimers, and high-speed SerDes silicon have become quietly indispensable to hyperscalers building scale-out networks, and Q3 FY26 demonstrates this. Revenue of $407 million, up 51.9% quarter-on-quarter and 201.5% year-on-year, at a GAAP gross margin of 68.5%.
What makes Credo more than a copper story is the recently announced acquisition of Israeli silicon photonics specialist DustPhotonics for up to $1.3 billion. The deal brings photonic integrated circuit technology in-house, extending Credo’s reach across 800G, 1.6T and 3.2T optical interconnect and giving it the tools to compete in near-packaged and co-packaged optics as copper runs out of headroom.
Management expects the combined optical business to generate more than $500 million in revenue in fiscal 2027.
Lumentum
Lumentum (NASDAQ: LITE) sits at the laser end of the stack. Its externally modulated lasers (EMLs), narrow-linewidth lasers and optical components are the light sources that AI transceivers depend on. The company is becoming increasingly important to emerging optical circuit-switching (OCS) architectures that route data as light in AI data centres.
Fiscal Q2 2026 revenue came in at $665.5 million, up 65% year-on-year, with non-GAAP operating margin expanding 1,700 basis points to 25.2%.
Recognition of Lumentum’s prowess in the area came in March, when Nvidia took a $2 billion strategic stake in Lumentum, alongside multi-year purchase commitments totalling billions.
An OCS backlog above $400 million has now been supplemented by a fresh multi-year OCS agreement with an existing hyperscaler, with manufacturing capacity for AI components reportedly sold out through the end of 2028. Guidance of $780–830 million for the current quarter points to 85%+ year-on-year growth.