What happened 

Shares of Lumentum Holdings (NASDAQ:LITE) soared more than 30% last month, according to data provided by S&P Global Market Intelligence, following news that it might be able to resume sales to one of its largest customers.

So what

Lumentum's stock plunged in May after the Commerce Department added Huawei Technologies to its Entity List, which effectively required U.S. companies to cease selling components to Huawei. The Chinese technology company accounted for approximately 15% of Lumentum's total revenue. 

In June, however, trade talks between China and the U.S. began to improve. As part of the negotiations, President Trump agreed to remove some restrictions on Huawei's ability to purchase components from U.S. businesses. "U.S. companies can sell their equipment to Huawei," Trump said during the G20 summit, provided that the transactions would not create a "great, national emergency problem." 

A puzzle painted as the U.S. flag connecting with a puzzle painted as China's flag

As trade talks between China and the U.S. come together, Lumentum stands to benefit. Image source: Getty Images.

Now what

It would be a significant positive if Lumentum were able to resume its sales to Huawei. As such, investors should monitor the ongoing trade talks for continued progress, as well as any updates from management in regard to Huawei.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.