Optical component makers plunge: Coherent -11%, Lumentum -9% as traders question AI capex sustainability

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Publication Date: 2026-07-28 16:15:54

Coherent Sinks 11%, Applied Optoelectronics Falls 10%, Lumentum Drops 9% as Traders Question AI Spending Spree

David Moadel Tue, July 28, 2026 at 9:15 AM PDT 4 min read

• CLS +4.75%
• GOOG +1.84%
• MRVL -6.62%
• LITE -9.54%
• COHR -11.96%

Quick Read

• Coherent and Lumentum shares are down 11% and 9%, likely due to profit-taking rather than company-specific news, despite holding YTD gains of 28% and 71%, respectively.
• Alphabet's $45 billion Q2 capex and negative $6 billion free cash flow ignited sector-wide doubts, dragging the SOXX down 4%.
• Celestica bucked the selloff with 62% revenue growth, highlighting a contradiction: the AI supply chain is booming while traders flee the narrative.
• Act now: The analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Coherent didn't make the cut. Grab the names FREE today.

Shares of Coherent (NYSE: COHR) are down 11% to $241.62 midday Tuesday, with Applied Optoelectronics (NASDAQ: AAOI) falling 10% to $87.89 and Lumentum (NASDAQ: LITE) off 9% to $644.56. There is no fresh company-specific news behind these moves. This is a sentiment and rotation trade, not a fundamental breakdown.

All three optics/photonics component names have ranked among the most crowded AI-infrastructure trades of the year. Coherent stock is up 28% year to date (YTD) even after today's drawdown, Lumentum shares have climbed 71% YTD, and Applied Optoelectronics stock is still up by an astounding 150% YTD. Today's action reads like profit-taking within very large 2026 rallies.

These same optics names were being pitched as prime AI-spending winners just last week. They are now being dumped on doubts about the same spending cycle.

AI Spending Doubts Trigger the Selloff

The catalyst is growing investor skepticism about whether hyperscaler AI capex is sustainable and whether richly valued optics suppliers can keep re-rating higher into the group's next earnings wave. Alphabet (NASDAQ: GOOGL) put a spotlight on that question last week.

Alphabet reported Q2 2026 capital expenditures of $44.92 billion, double the year-ago figure, and swung to free cash flow of -$5.86 billion. Google also flagged a full-year 2026 capital budget of $195 billion to $205 billion and tapped debt and equity markets to fund the buildout. The negative cash flow has become the flashpoint for questions about return on AI investment.

Alphabet's top line held up, with revenue of $119.80 billion growing 24.2% year over year (YoY). The valuation piece matters here. Lumentum stock trades on a trailing P/E ratio of 110x and Coherent stock on 113x, multiples that price in years of AI-driven growth. Applied Optoelectronics is not profitable on a trailing basis, so its shares are even more sensitive to any wobble in the AI capex narrative.

Story Continues

Peers and Sector Reaction

The selloff extends well beyond optics. The iShares Semiconductor ETF (NASDAQ: SOXX) is down 4% to $493.97, a meaningful move for a diversified semiconductor proxy. The SOXX ETF is a narrow, concentrated fund tracking a single sector, so its volatility runs higher than a broad-market fund. Today's decline signals rotation out of AI-chip exposure across the group.

Marvell Technology (NASDAQ: MRVL) stock is trading lower alongside the optics names, despite CEO Matt Murphy...