II-VI Incorporated

Last night, investors followed the light.

Optical networking companies Lumentum and Coherent were the two biggest gainers on the S&P 500.

Their technology helps move enormous quantities of data quickly between the chips and servers inside AI data centers.

So, you know, I think an important question to ask is how optical components have become such a critical and potentially lucrative part of the AI infrastructure build out.

And after the extraordinary gains that we have seen, I think it's time to perhaps ask, are they still investable? So, Lumentum, Coherent, companies that I'm looking at in particular for you.

In the meantime, in other news, Anthropic is to open a Singapore office in October.

And sees Singapore as a standout market for Claude.

[upbeat music] Time to go through some past picks from Ivana from January 28th of this year.

Ivana, at the time you chose Coherent, COHR, uh, out of New York, and at that time, uh, it was at 221.14 US.

It's at 288.53 today, so 30% upside, uh, 30% for total return.

Was that on the optical components, uh, that you chose it back then?

So, and we're seeing now optics also being used inside the server.

So their traditional use case is for scale-out applications, and now as we go forward into, uh, into the AI buil- buildout, they're even finding applications inside the servers for scale-up applications.

So we still do, uh, really like, uh, Coherent.

And as you can see, the stock has really pulled back here, um, over the, over the summer, so I think this is a pretty, uh, attractive entry point.

We're getting a bit of a rebound.

Uh, Coherent, COHR, is up two percent, Lumentum up two, up two percent as well.

This tends to be a slightly higher beta trade, meaning it, it moves it a little bit more than the other AI names because this is more exposed to frontier tier models.

These names, uh, are, are used to use-- are used to move high amounts of data, so the more frontier model demand, the more this space in particular, the optic names, uh, get a rebound, and we're seeing a bit more of a rebound today.

Corning was a big loser today, down 13.7%.

Teradyne was down 13.3%, Coherent down 12.7%.

They were some of the worst performing S&P 500 components, with Corning facing the additional headwind of a prospectus supplement related to an equity distribution agreement covering up to $2 billion of common stock.

Some big winners today on that AI is going to kill us, which I'm going to talk about more in the third segment.

We own both.

We also own Coherence.

So just for full disclosure, so I think that the optics trade should do well next year.

All right.

Category three is AI networking and optical infrastructure.

ANET, Arista Networks, COHR, Coherent, and LITE Lumentum.

Yeah.

And this is because large AI clusters require much more than just processors.