Transcription
The AI trade is all about bottlenecks, and there are none bigger than photonics, fiber optics. It is what is moving markets. We covered this a couple of weeks ago. Today, we're not only going to refresh you on that theme, but also cover five stocks that you should be focused on right now in 2026. Jason, why don't you break down the ecosystem for photonics and why it's so important?
Great question. We went over in our previous video the layers of optoelectronics, but something investors are getting hip to right now. There is a real problem in AI, and it's a speed problem, but it's not the speed problem people are thinking about, like chips and memory. We already went over that. That was semiconductors' massive rally last year. The problem is now each chip does not communicate on its own. It's part of a larger network. You can almost think of it like a brain, like a living organism. You have a bunch of GPUs talking to each other, and each interconnection is a potential point for a bottleneck, for latency. Every time one chip sends a packet of photons or a packet of information to another, it's called a hop. And if you get one little millisecond of latency in one hop and you amplify that times thousands of chips, you can see how quickly this is becoming a problem.
The good news, it's all getting fixed and addressed by light. Optoelectronics, fiber optics is addressing this problem. Nothing moves faster than the speed of light, right? 186,000 miles per second. Well, when you run light through a fiber optic cable made by people like Corning, GLW, which we'll go over in a second, you can't actually achieve 186,000 miles per second. You have resistance in the little glass fiber that's thinner than a human hair. By itself, speed drops down to about 125,000 miles. Good news though, even at that reduced speed, light circles the earth five times per second. So we're really talking about the cutting edge of communication. Even with all that speed, delays accumulate, and that really is the crux of the issue. These little milliseconds turn into a lifetime for chips depending on each other to communicate. It's not just about faster chips, right? It's about these faster systems, and fiber optics and optoelectronics are addressing that.
Let's not think about AI as a single machine. Let's think about it as a distributed system, like I said, a living organism. They have these six layers. One is you have to generate the light itself. These are the laser makers. Two, they got to travel down a highway. That's the fiber optic cables. Next, you need someone directing the traffic signals, making sure that the signals are going to the proper destination. Then you got the manufacturers of the physical connections, connecting all that together. You have people who are manufacturing the optical components, but doing so at a scale that can keep up with this massive boom in demand. And finally, everything in the optic cables, it's got to stay clean. Garbage in, garbage out. You need clean signals. So we have players in that as well. This is the whole ecosystem.
That's awesome. I think it's great to understand all of that. And then whenever you can find the best stocks to play this theme, that's where the big juice is. When you just started talking about light, and I'm going to start talking about ticker LITE. If you haven't seen the light, guys, you need to. Lumentum really is all about a multi-year story here. What I have are the EPS estimates by analysts. 31 analysts, by the way. This is a stock that's up 133% year-to-date. And here we've got the 2026 EPS estimates, 27 and 28. All you need to know is the big stair step that's going to happen not only in this year, but next year and in 2028. You drilled into this company, seven analysts recently raised their full-year EPS estimates. You got a PEG ratio of 0.43. Themes here are optical photonics, lasers, AI, networking. You're talking about a forward PE of 56, so it's not cheap. And it's a market cap of 60 billion. This is a tremendous, tremendous stock opportunity based on the fundamentals. A huge player, Lumentum is making the lasers itself. They're focused more on telecom optics and data center optics. Triple the earnings in the next couple of years. If the investment universe is understating the expectations of earnings, all you need is explosive guidance. This thing could vault a lot higher. The flows tell the story. Money has just been piling into this name over the past year. We're talking about a stock that was $78. It was just over $900 recently. This is a tremendous stock with a lot of momentum.
Let's go ahead and get into the number two name. This is going to be Coherent, ticker COHR. For this one, we're also going to be looking at EPS estimates because it is just that beautiful. Folks, get your notebooks out. If you want to know what makes a stock go up, it's when earnings are expected to surge, right? That's why we get into investing in the first place. We want a share of big profits. Here you can see full-year EPS estimates, $5.37, next year $7.62. You know what? Let's go ahead and balloon that up by 25 to 30% to $10.20. Notice that these have been growing recently, so estimates, analysts continue to really love this stock. 21 analysts are covering Coherent. Five analysts recently raised their full-year EPS. PEG ratio 1.27, which is not that bad. Low earth orbit satellite lasers. Little bit cheaper than Lumentum at 47 times, and the market cap is right around the same at $63 billion. While Lumentum focuses on telecom and data centers, Coherent is focusing more on the materials, the components in the systems themselves. Together, Coherent and Lumentum really solidify that optics layer. As these AI clusters are scaling and growing, these companies are manufacturing the light that powers the communication itself. The story is the same here with Coherent. It's got a MAP score of 82.8, and just money has been following this name repeatedly. Also, what's interesting about Coherent and why I really like it, it is one of the highest quality stocks in our research going back to November. You see these blue bars? That's the stairway to heaven. Every great stock in our data is going to have those institutional footprints. Awesome, awesome name. By the way, if you want to get this report in written format, you can always go to moneyflows.com, put in your email, and you can find that in the description of this video.
We got to keep going, Jason, because the next name is Ciena, ticker CIEN. Again, the story is EPS. You don't have to get too creative whenever you're looking for all-star company stocks. Just follow the money. Where is EPS going? And just like the other two stocks, it's a multi-year play. $6.15 for this year, $8.45 for next. Then it's going to accelerate to $12.47 in 2028. That's exactly what you want to see. PEG ratio of 1.59. It's got optical networks, coherent optics, AI-driven bandwidth, everything you want in an optics company. Forward PE 71. Yep, it's a little rich. Market cap of $73 billion.
Now, again, Ciena, as these AI clusters scale and you get thousands of the light to all the different places. So we had the optics manufacturers, Lumentum and Coherent. Now you got Ciena that's going to route all that light all over through a fiber optic cable. You can start to see how the pieces are coming together.
Let's do one channel check here. Just look at the flows again. MAP score 79.3. Everyone knows that's about as good as it gets, and the flows just non-stop green. Remarkably, most of these names have seen zero outflows. Think about that. From all of the sell-offs, all the volatility that we've had, money continues to follow into this theme. That is just how big it is. But we have more to go through. We're going to actually go into another name here. This is uh the number four stock, and it is Amphenol, ticker APH. Now, interestingly enough, when I was doing some digging on this name, I was really impressed by the sales and net income growth for this company. So here we can see 2026 estimates all the way throughout 2028. You can see that revenues continue to grow double digits, but notice that bottom line, that net income. $5.6 billion this year, $6.6 next, $7.4 billion in 2028. These numbers could be low. That's how deep the bottleneck is. You've got three analysts recently raised their full-year sales recently. The PEG is reasonable at 1.46. What are the themes? AI infrastructure, fiber optics, CommScope, communications. Forward PE 32.3, so actually on the cheaper side of some of these other names. Market cap is a lot larger, 183 billion.
Now, listen, I'm a musician. I got a little studio at home, and I got keyboards and I got, you know, mixers and stuff. When I was setting it up, one of the biggest expenses I overlooked was the cables connecting it all. I mean, hundreds of dollars I didn't forecast in. As these systems grow and you have data centers and you have AI clusters then and servers, all these systems, they need to be connected together, and that is what Amphenol creates, the high-quality, high-speed connectors to connect the systems all together. It's a great company. MAP score 79.3, and the flows tell the story. What's really unique about this one? I mean, this thing started seeing inflows at $83 all the way up to, looks like $165, so it's a double there. It did see some outflows back in March during that big tech sell-off. But here's the important piece, the stairway to heaven, right? Very few companies, if ever, get multiple inflow signals, these outlier signals. This just tells you how high-quality of a stock Amphenol really is.
Yeah. For number five, they actually just recently reported earnings. Really excited about Corning. This is GLW. For this one, we're going to be looking at the revenues of their optical communications segment. So it's not overall revenues, this is the growth engine of that business, which grew 36% year-over-year. Look at this. So for 2026, $8.1 billion. Next year, $10.58. Then it's just going to accelerate, $12.74 billion, okay? Huge growth segment for Corning. You look at the PEG, 1.57, it's not that bad. The themes, optical fiber cable, data centers. They recently have a Meta deal. Forward PE, 52. Market cap, 142 billion. This company has somewhere to be. Looks like that is northbound.
Now, again, in our layers here, you need something for the light to travel down. That is fiber optic cable. And old-school fiber optic cable, it transmitted light in the form of photons down this one path. Well, new fiber optic cable, first of all, it's smaller than the thickness of a human hair. And on top of it, they can transmit multiple wavelengths of light at the same time. So you're broadening out the bandwidth of one singular thing that was kind of a choke point before. Corning is at the center of it manufacturing these fiber optic cables. This one might have the most inflows of all of them. I mean, this is just bunched up green inflows really beginning almost a year ago in June. And it's just that stair-step day after day. And you recently start to see that this one has made our outlier 20 list again. Very few companies will ever be able to reach that status, but we are starting to see this in the optical space.
Now, there are a couple of other names I do want to bring to people's attention. A great one to consider is Fabrinet. 82.8 MAP score. Again, the story is all about the flows. Find another theme that has the stairway to heaven. Very few are out there. That just tells you how big this theme is. Fabrinet is really firing on all cylinders. This is a $24 billion-dollar market cap firm. Now, again, uh Fabrinet is kind of one of the more boring players in an exciting space because they build the optical components that allow this whole infrastructure to expand and scale. Manufacturing bottlenecks, that becomes a major constraint on the whole system. Fabrinet is right at the heart of keeping everything flowing.
And I'll tell you what, this one's a little bit riskier, MaxLinear, ticker MXL. Full disclosure, I do own this one personally, but they had one of the biggest beat and raises that I have seen in a long while. And it's come into everyone's attention. This is definitely an optics play. Now, there are two key points here. MaxLinear is keeping the signals clean. As these speeds get higher and higher, the introduction of even the tiniest bit of noise can really compromise a signal. So MaxLinear is keeping it clean. I know what some of you are going to say. Thanks a lot for not telling me before it just rocketed 70% or whatever it is. It's very important for you all to realize that when a company completely blows away the street estimates, we affirm's guidance at a much higher level than previously anticipated, all bets are off. Everything was wrong. The entire repricing, yes, it just happened, and you missed out on that rise. But you got to be thinking multiple years from now where this company is going to be, likely, as this whole space expands. And there's a good chance that everybody's caught flat-footed and money's rushing in for a reason, and it's not for the stock to go back down.
Jason, you are right. Listen, as we wrap this video up, I think it'd be great to really show everybody how optics is a system. We've got a great image for everyone to understand how all of this works, how all these companies work together in this ecosystem. So we have our six layers again. You got the manufacturers of the light themselves. We talked about it, Lumentum and Coherent. They make the lasers. Lasers got to travel down something, that's the fiber optic cable, that's Corning. Next, everything's got to be directed to the right place. Our traffic cop is Ciena, directing all this light-speed traffic. It's all got to be interconnected, high-quality connectors. That's what Amphenol is doing. And then manufacturing all of these optical components at scale to keep pace with demand, that is Fabrinet's sort of shingle in all of this. Last but not least, got to keep that light clean. That's MaxLinear, and that's why it just had this explosive move higher because all of a sudden they're emerging as a major player in this layer. This was an outstanding chat, and again, one of the biggest themes in the marketplace. We just broke it down with five amazing stocks. If you enjoyed this video, please like and subscribe to our YouTube channel. It really helps us out. I'll also put our older optics video right here so you can click and watch. Odds are you're going to really like that. And next week, we're going to be talking about memory stocks. You guys know we have loved memory stocks for many, many months. We're going to be covering that Thursday, 9:00 a.m. Eastern. We will see you guys next time.