Jefferies: Coherent, Lumentum to Benefit from AI-Driven Transceiver Growth

The AI revolution is driving significant growth in the demand for high-speed, low-power optical transceivers, and two leading companies in this space, Coherent and Lumentum, are poised to capitalize on this trend. According to a recent report by Jefferies, the AI-driven optical module market is expected to witness a 45% year-over-year growth in 2024, demonstrating strong market dynamics and promising growth prospects. This growth is driven by the increasing demand for high-speed and efficient data transmission in cloud computing, big data, and the Internet of Things (IoT).



Coherent and Lumentum have both demonstrated their commitment to the AI-driven optical transceiver market through strategic partnerships and collaborations. Lumentum, for instance, has partnered with NVIDIA, a leading AI hardware provider, to develop high-speed, low-power optical interconnects for AI clusters. This collaboration has enabled Lumentum to tap into NVIDIA's vast customer base and expertise in AI, allowing it to better serve the growing demand for AI-driven optical transceivers. Coherent, on the other hand, has worked with Microsoft to develop and deploy high-bandwidth, low-latency optical interconnects for AI and HPC applications. This collaboration has helped Coherent gain a competitive edge in the AI-driven optical transceiver market by providing it with insights into Microsoft's specific needs and enabling it to tailor its products to meet those requirements.



The acquisition of Coherent by Lumentum in 2021 has further strengthened their position in the AI-driven optical transceiver market. This acquisition brought together two highly complementary, best-in-class portfolios and teams, accelerating photonic innovation and significantly expanding Lumentum's penetration of the more than $10 billion market for lasers and photonics outside of communications and 3D sensing. This strategic move has positioned the combined company to better serve the needs of a global customer base increasingly dependent on photonics to enable important end-market transitions, including the shift to digital and virtual approaches to work and life, the transition to 5G in wireless networking, advanced bioinstrumentation, advanced microelectronics, and new materials for next-generation consumer electronic devices, flat panel and OLED displays, communications equipment, electric and autonomous vehicles, and energy storage.



In conclusion, the AI-driven optical transceiver market is experiencing strong growth, driven by the increasing demand for high-speed and efficient data transmission in cloud computing, big data, and the Internet of Things (IoT). Coherent and Lumentum, through their strategic partnerships and collaborations, are well-positioned to capitalize on this trend and benefit from the growing demand for AI-driven optical transceivers. Investors should consider these companies as attractive opportunities in the AI-driven optical transceiver market.