Shares of optical component makers have re-emerged as a leading momentum play, with Applied Optoelectronics Inc. climbing 76 percent in just nine sessions since late July. The move reflects renewed investor conviction that major technology firms will sustain artificial intelligence infrastructure spending.
Optical components use light to transmit data faster and more efficiently than copper wiring. Demand for the equipment has risen sharply as data centers built for AI computing have expanded.
Other sector names have posted substantial gains over the same period. Coherent Corp. rose 48 percent, while Fabrinet, Corning Inc. and Lumentum Holdings Inc. each gained more than 25 percent.
Michael Monaghan, a portfolio manager at Founder ETFs, called optical stocks a critical bottleneck in the AI supply chain, a position he said drives their pricing power and order volumes.
The current rally follows a strong run earlier in 2026. From January through mid-May, Corning, Lumentum and Coherent each gained more than 100 percent, ranking among the top 15 performers in the S&P 500 Index. Applied Optoelectronics, which is not part of the S&P 500, surged 446 percent during that period.
Sentiment turned skeptical around mid-May, when a selloff that began in semiconductor stocks spread across the broader technology sector and lasted through July, driven by concern over the sustainability of AI spending plans.
Confidence returned after Microsoft Corp. Alphabet Inc. Amazon.com Inc. and Meta Platforms Inc. reported strong cloud-computing sales and reaffirmed plans for heavy capital expenditure. Optical component firms benefited directly from that shift.
Lumentum's fourth-quarter earnings and first-quarter outlook, both exceeding analyst expectations, provided a fresh catalyst for the sector.
Hyperscaler capital expenditure plans now carry more weight for these stocks than the optical companies' own earnings or revenue results. "Right now people are watching the capital spending more so than earnings or revenue," Monaghan said.
That dependence is also the sector's primary risk. If hyperscaler spending slows, Monaghan said, these stocks will fall.
The Nasdaq rose 0.6 percent to 26,596, while the S&P 500 gained 0.3 percent to 7,749. Nvidia Corp. a bellwether for AI-related demand, rose 2.1 percent to $222.04.
