Optics Stocks Plunge: Coherent Down 11% as AI Spending Sustainability Questioned

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

Tickers: COHR, AAOI, CLS, GOOG, NVDA

Quick Read

• Coherent and Lumentum shares fell 11% and 9%, respectively, likely driven by profit-taking rather than company-specific news, despite both holding year-to-date gains of 28% and 71%.
• Alphabet's $45 billion Q2 capital expenditure and negative $6 billion free cash flow sparked sector-wide doubts, dragging the SOXX semiconductor ETF down 4%.
• Celestica bucked the selloff with 62% revenue growth, highlighting a contradiction: the AI supply chain is booming while traders flee the narrative.

Market Moves

Shares of Coherent (NYSE: COHR) fell 11% to $241.62 midday Tuesday, while Applied Optoelectronics (NASDAQ: AAOI) dropped 10% to $87.89 and Lumentum (NASDAQ: LITE) declined 9% to $644.56. No fresh company-specific news drove these moves. Analysts describe the action as a sentiment and rotation trade rather than a fundamental breakdown.

All three optics and photonics component names have ranked among the most crowded AI-infrastructure trades this year. Despite today's drawdown:

• Coherent stock remains up 28% year-to-date (YTD)
• Lumentum shares have climbed 71% YTD
• Applied Optoelectronics stock is still up 150% YTD

Today's selloff appears to be profit-taking within very large 2026 rallies. These same optics names were being pitched as prime AI-spending winners just last week but are now being dumped amid doubts about the same spending cycle.

AI Spending Doubts Trigger the Selloff

The catalyst is growing investor skepticism about whether hyperscaler AI capital expenditure is sustainable and whether richly valued optics suppliers can continue re-rating higher into the group's next earnings wave. Alphabet (NASDAQ: GOOGL) highlighted 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).

Valuation concerns are central to the selloff:

• Lumentum trades at a trailing P/E ratio of 110x
• Coherent trades at 113x
• Applied Optoelectronics is not profitable on a trailing basis, making its shares even more sensitive to any wobble in the AI capex narrative

These multiples price in years of AI-driven growth.

Peers and Sector Reaction

The selloff extends well beyond optics. The iShares Semiconductor ETF (NASDAQ: SOXX) fell 4% to $493.97, a significant 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 traded lower alongside the optics names, despite CEO Matt Murphy citing "exceptional AI-related" demand.

Celestica bucked the selloff with 62% revenue growth, exposing a contradiction: the AI supply chain is booming while traders flee the narrative.

Image credit: luchschenF / Shutterstock.com

Editor's Note: The analyst who called NVIDIA in 2010 has named his top 10 AI stocks — and Coherent did not make the cut.