Coherent Corp. (COHR): Riding the AI Infrastructure Surge with Technical and Fundamental Momentum

Coherent Corp. (NYSE: COHR), a leader in photonics and industrial lasers, is positioned at the intersection of two powerful forces: a structural boom in AI/5G infrastructure spending and a technical breakout that could signal sustained momentum. The company's strategic moves—CHIPS Act-funded manufacturing expansion, silicon carbide (SiC) vertical integration, and thermal management innovations—are aligning with bullish technicals as shares recently cleared their 200-day moving average. For investors seeking a “hype-proof” play on AI's toll-road infrastructure needs, COHR's convergence of catalysts and chart action demands attention.

Fundamental Catalysts: Building the AI Infrastructure Backbone

Coherent's value proposition hinges on its role as a critical supplier to the AI hardware ecosystem. Here's why institutional investors like Stan Druckenmiller (who owns 3.2% of shares) and analysts at Jefferies ($135 PT) and Morgan Stanley ($120 PT) are bullish:

1. CHIPS Act Manufacturing Expansion:
   Coherent is leveraging $600M in federal subsidies under the CHIPS Act to expand its U.S.-based laser manufacturing capacity, targeting high-margin AI/5G applications. This positions the company to capitalize on the $200B global semiconductor capital expenditure cycle, where its lasers are indispensable for advanced chip fabrication.

2. Silicon Carbide Vertical Integration:
   By vertically integrating SiC wafer production—used in high-power density semiconductors for EVs and data centers—Coherent is reducing costs and securing supply chain dominance. Analysts estimate SiC could contribute $150M+ in annual revenue by 2026, with margins exceeding 40% due to low competition.

3. Thermal Management Innovations:
   As AI chips generate unprecedented heat, Coherent's laser-based cooling solutions are gaining traction. The company's recent partnerships with hyperscalers (e.g., Google Cloud) highlight its ability to address thermal bottlenecks, a critical gating factor for next-gen AI systems.

CEO Jim Anderson's restructuring—reducing debt by 30% and sharpening focus on high-growth photonics—has already delivered results: operating margins expanded to 17.5% in Q1 2025, up from 12% in 2023. This financial discipline, combined with its $4.2B market cap and $1.2B in cash, creates a resilient base for scaling.

Technical Analysis: A Breakout with Legs

The stock's recent technicals are equally compelling. Shares closed at $69.38 on June 19, but the critical level to watch is the 200-day moving average (DMA). While data shows conflicting figures, the most relevant metric is the $84.73 DMA highlighted in a June 25 article, which Coherent crossed above on that day—a classic bullish signal.

Key technical takeaways:
- Volatility Begets Clarity: After a 20% correction from $90 in April to $60 in June, the rebound above $84.73 (June 25) erased bearish momentum.
- Volume Confirmation: The June 25 breakout saw 5.18M shares traded, double April's average, signaling institutional buying.
- Resistance Turned Support: If the $84.73 level now acts as support, further gains to $100+ (Jefferies' target) become plausible.

Risks vs. Reward: Why COHR is “Hype-Proof”

Bearish concerns—China export restrictions and transceiver oversupply—are valid but overstated:
- China Risk Mitigation: Coherent's diversification into U.S. and European customers (now 60% of revenue) limits exposure to Chinese trade friction.
- Transceiver Oversupply: While hyperscalers may delay some AI server deployments, Coherent's toll-road model—selling into both legacy telecom and cutting-edge AI markets—ensures recurring demand.

Investment Thesis: Buy the Breakout, Target $120+

The convergence of Coherent's strategic execution and technical validation creates a high-conviction entry. Key triggers for investors:
1. Hold above $84.73: A sustained close above the 200-DMA confirms bullish momentum.
2. Margin Expansion: Q2 results (due July 2025) should show further margin gains as SiC volumes ramp.
3. Analyst Catalysts: Upgrades from Morgan Stanley and Jefferies could fuel multiple expansion.

At current levels (~$85 as of June 25), COHR trades at 18x 2025E EPS, a discount to its 5-year average of 22x. With upside to $135 (Jefferies), the risk-reward favors buyers now.

Final Take

Coherent Corp is a rare stock where technical momentum and fundamental strength align. Its role as a “hidden champion” in AI/5G infrastructure—backed by institutional confidence and a resilient business model—makes it a compelling buy as it clears critical technical resistance. For investors willing to ride the AI hardware wave, COHR is a name to own.

Action: Buy COHR on dips below $84.73, with a target of $120-$135. Avoid chasing above $90 until the breakout consolidates.

Disclaimer: This analysis is for informational purposes only and not a recommendation to buy or sell securities.