What Happened?
Shares of materials and photonics company Coherent (NYSE: COHR) jumped 3.1% in the morning session after the company inaugurated a new $127 million high-tech manufacturing plant in Vietnam. The U.S.-based semiconductor materials and components firm opened its new facility in the Nhon Trach Industrial Park in Dong Nai province. This move marked a significant step in Coherent's global growth strategy and demonstrated increasing confidence in Vietnam's investment potential. The expansion underscored the company's efforts to scale its operations and meet growing demand. Adding to the positive sentiment, analysts noted strong earnings expectations for the company's upcoming report.
After the initial pop the shares cooled down to $103.33, up 3.2% from previous close.
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What Is The Market Telling Us
Coherent’s shares are extremely volatile and have had 48 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 4 months ago when the stock gained 12.6% on the news that Raymond James analyst Simon Leopold upgraded the stock's rating alongside Lumentum from Outperform to Strong Buy following positive updates from Nvidia's annual GPU Technology Conference and Corning's analyst day meeting. Leopold addressed market concerns over Co-Packaged Optics, a technology that integrates optical transceiver (essentially a laser that beams data) and silicon chips (the computer's brain) in one package. This means that information no longer needs to travel long distances, boosting efficiency and speed. Some investors had been worried about its impact on these companies, but Leopold felt those concerns were overblown.
Notably, as Nvidia introduced its first co-packaged optics silicon photonics system, Lumentum contributed lasers, while Coherent played a key role in silicon photonics. Providing additional context, Nvidia CEO Jensen Huang highlighted the critical role of silicon photonics in enabling large-scale GPU interconnectivity. He explained, "The challenge with scaling out GPUs to many hundreds of thousands is the connection of the scale-out. When the data centers are now the size of a stadium, we need something [new]—and that's where silicon photonics comes in."
Additionally, Leopold noted that while Coherent and Lumentum stocks had faced pressure leading up to the year's OFC (Optical Fiber Communications Conference) trade show, increased clarity on CPO and broader market opportunities could serve as positive catalysts for both stocks. Finally, the analyst predicted that the AI backend transceiver market, where both Lumentum and Coherent supply Nvidia, would reach $22 billion by 2030 (30% compound annual growth rate).
Coherent is up 2.7% since the beginning of the year, and at $103.33 per share, it is trading close to its 52-week high of $112.02 from December 2024. Investors who bought $1,000 worth of Coherent’s shares 5 years ago would now be looking at an investment worth $2,215.
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