Shares of specialty node semiconductor manufacturer Tower Semiconductor (TSEM +5.73%) rallied 31.5% this week as of the end of Thursday's trading, according to data from S&P Global Market Intelligence.
Tower benefited from continued enthusiasm around artificial intelligence infrastructure, which got several boosts this week. Not only did Nvidia hold its GTC conference and certain memory companies report blockbuster earnings, but a big silicon photonics conference held mid-week contributed to the outsize gain.
Tower is a leading foundry for "SiPho" chips, so it followed suit with a big rally. In addition, Tower made a couple of technology-related announcements this week, contributing to the optimism.
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Key Data Points
Tower inks photonics partnership, announces new power platform
On Monday, Tower announced a new partnership with Oriole Networks, a privately owned AI networking company. Oriole is the developer of the PRISM AI fabric (Photonic Routing Infrastructure for Scalable Models), which the company claims helps AI data centers alleviate networking bottlenecks and lower latency for both scale-up (within the data center) and scale-out (between data centers) AI networking. Dr. Ed Preisler, GM of Tower's RF business, said in the press release, "Our joint work with Oriole is a key step toward bringing AI back-end networking to market that can scale clusters and break through today's latency wall."
The Oriole announcement marks another customer win for Tower, which has rocketed higher over the past year thanks to its leadership in manufacturing silicon photonics transceivers.
On top of Tower's announcement, leading photonics chipmakers gathered at the Optical Fiber Communications Conference in Los Angeles this week. In particular, photonics chipmaker Lumentum (LITE +8.01%) gave a long-term financial model at the conference that wowed investors, forecasting $1.25 billion in quarterly revenues within the next nine to 12 months, then rising to a $2 billon quarterly run rate within a year after that.
For reference, Lumentum generated just over $2 billion in total revenue over the past 12 months. So, its new outlook reflects the explosive growth anticipated for the silicon photonics sector. Previously, photonics were primarily used for connections between data centers. Now, however, the technology seems set to displace traditional copper-based networking technology within AI data centers themselves.
Image source: Getty Images.
And while silicon photonics chipsets seem set to boom, so could power semiconductors, which Tower also manufactures. On Tuesday, Tower Semi announced its latest BCD (Bipolar-CMOS-DMOS) technology, which is part of its Gen3 power management platform. The new generation should continue to shrink the size and increase efficiency of the latest high-current power chips, which are moving beyond their traditional markets in EVs and energy infrastructure to also support electricity-hungry, heat-generating AI data centers.
Photonics stocks are on fire
The past week's surge has catapulted Tower back up to all-time highs, and its stock is now up 335% over the past year. That's impressive, but it also mirrors the astounding performance of virtually all semiconductor companies that make silicon photonics and high-speed optical transceivers.
The AI transition, it turns out, is lifting many boats in the semiconductor industry. First, it was AI GPUs; then foundries; then memory companies. In 2026, the focus has shifted to CPUs, photonics, and power chips. And with so many chipmakers looking to capitalize, those few companies that undertake the difficult work of chip manufacturing, like Tower, are reaping outsize benefits.
