The AI memory supercycle is real and still running. High-bandwidth memory (HBM) became the scarce resource around which the entire AI industry organized. Investors who got there early made a lot of money.
This caused the conversation in AI infrastructure to shift. Power is one constraint. But the issue that engineers are losing sleep over is optical interconnect, the technology that moves data between chips at the speed of light, inside and between servers. As AI models grow larger and more distributed, moving data across copper wires becomes too slow and too power-hungry.
Silicon photonics is becoming the next critical layer of the AI stack. The silicon photonics market is estimated at $3.6 billion in 2026 and is projected to reach $15.7 billion by 2033 -- a 23.2% compound annual growth rate. Lumentum Holdings (LITE 8.62%) is the stock in this market I'd buy right now, before this cycle gets crowded.
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In March 2026, Nvidia (NVDA 5.93%) invested $2 billion in Lumentum through a private placement of convertible preferred stock and signed a multibillion-dollar purchase commitment for advanced laser components. One month later, Lumentum announced a new 240,000-square-foot manufacturing facility in Greensboro, North Carolina, acquired from semiconductor company Qorvo. The facility will produce indium phosphide (InP)-based optical devices -- the lasers that power next-generation AI transceivers -- with Nvidia confirmed as a customer.
The Greensboro facility isn't expected to ramp production until mid-2028. Think about that for a second. Nvidia is not only paying for Lumentum's future capacity today -- it's building supply chain infrastructure for a product cycle that won't fully arrive for two years. That is a sign that the company is locking in a critical supplier before demand overwhelms supply.
NASDAQ: LITE
Key Data Points
A risk: Lumentum's stock is up over 1,100% in the last year
Lumentum's stock has moved sharply in 2026, which might make it feel late. Over the past year, the stock has surged an extraordinary 1,110%, climbing from roughly $77 to $938 per share.
But the InP fab is not yet producing. When that fab alone starts operations, it could bump the ticker up another 100%. The 1.6 terabit-per-second transceiver generation has barely shipped at scale. The co-packaged optics transition -- where the transceiver moves inside the chip package itself -- is a product cycle that has yet to produce meaningful revenue at any company.
The risk is with Lumentum timing. Optical supercycles can stretch, and if Nvidia's roadmap shifts or AI capex growth slows, Lumentum's growth rates could compress before Greensboro comes online. Dilution from the preferred stock conversion is also worth watching.
But if you're looking for the infrastructure layer that moves from "important" to "indispensable" over the next five years, photonics is the answer. And Lumentum is the company with a $2 billion strategic partner, a domestic fab, and a product roadmap to back it up.
