Lumentum Joins S&P 500, Inks NVIDIA Deal
Lumentum has made its debut on the S&P 500 and simultaneously announced a major deal with NVIDIA. The company will supply next-generation optics for AI infrastructure, a move that reshapes the competitive landscape for data center hardware providers.
The multiyear, nonexclusive agreement with NVIDIA involves a $2 billion investment and a multibillion-dollar purchase commitment for Lumentum's advanced laser components. This funding is earmarked to expand R&D and to help build a new U.S.-based manufacturing facility to meet the surging demand for optical components in AI data centers. NVIDIA's founder and CEO, Jensen Huang, stated the collaboration is aimed at building the next generation of "gigawatt-scale AI factories." The partnership focuses on advancing silicon photonics and co-packaged optics, technologies crucial for scaling AI systems as traditional copper interconnects face physical and energy-efficiency limitations. This deal comes on the heels of a standout second quarter for Lumentum, which reported revenues of $665.5 million, a 65.5% increase year-over-year. The company's non-GAAP earnings per share surged to $1.67, a significant jump from $0.42 in the same quarter of the previous year. The company's backlog for optical circuit switches has already surpassed $400 million. Looking ahead, Lumentum has projected revenue for the third fiscal quarter of 2026 to be between $780 million and $830 million. In a concurrent move, NVIDIA also invested $2 billion in Coherent Corp., one of Lumentum's competitors in optical technologies. This dual investment highlights NVIDIA's strategy to secure its supply chain for the critical optical components required for future AI infrastructure. The inclusion in the S&P 500 will become effective before the market opens on March 23. This move is considered a significant buying event, as the more than $7 trillion in passive index funds and ETFs that track the S&P 500 are now required to purchase Lumentum's stock. Following the announcements, analysts have sharply increased their price targets for Lumentum's stock (NASDAQ: LITE). For instance, Rosenblatt analyst Mike Genovese raised his price target from $580 to $900, and Stifel's Ruben Roy increased his target from $480 to $800.
