Lumentum Holdings led S&P 500 gainers on Monday as optical stocks started to recover from the previous week's declines. An Evercore ISI analyst linked the rebound to Anthropic's IPO filing, signs of durability in the AI trade and supply-side news.
Lumentum Holdings led the S&P 500's gainers on Monday as optical stocks started to stage a recovery from the previous week's declines. The stock was up 8.2% at the close, while fellow optical connectivity maker Coherent finished up 5.8%.
Ciena also climbed 4.9% on the day.
Anthropic filing and AI deals lift sentiment
Evercore ISI analyst Amit Daryanani pointed to renewed interest in the optical sector after last week's selloff. He said many investors had likely been waiting for Anthropic to release its S-1 filing before piling back into the trade. Anthropic filed for its IPO on Monday, and its financials generally offered a lift to chip stocks.
Daryanani also said AI-sector earnings so far look "relatively healthy from a fundamental perspective." In his view, Meta Platforms' announcement of an equity raise and SpaceX's commitment to $40 billion in financing for chips and other AI hardware gave investors a sign of ongoing durability in the AI trade.
Import limits and indium phosphide supply in focus
Daryanani also pointed to expectations that the Federal Communications Commission will limit imports of optical transceivers from foreign suppliers early next year. He said the decision would effectively remove Chinese suppliers from the U.S. market for next-generation 3.2T optical transceivers, and China makes about two-thirds of these components, citing an expert. Any restrictions on China would in turn benefit U.S. manufacturers and allied suppliers, he said.
News out of Asia over the weekend pointed to a potential slowdown in supply growth for indium phosphide, a semiconductor material, which he called another key driver on Monday. According to Daryanani, that would indicate Chinese suppliers are having challenges ramping up enough capacity to meet current speed requirements.
Daryanani said the traditional optics cycle typically lasts five years, but AI has led to near yearly increases in lane speeds. He said expanding manufacturing capacity and qualifying products will take time, so supply will remain limited.
Source: MarketWatch
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