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Photonics exchange-traded funds (ETFs) are emerging as one of the newest ways for investors to gain exposure to the next phase of the artificial intelligence (AI) infrastructure build-out.
While much of the recent excitement has centered on data centers and the memory trade, particularly companies producing DRAM and NAND chips that feed increasingly data-hungry AI models, some analysts believe photonics could represent the next major bottleneck.
Photonics refers to the use of light rather than electricity to transmit, process, and manipulate information. As AI models become larger and more computationally intensive, traditional copper interconnects are increasingly reaching bandwidth, latency, heat, and power consumption limits.
Photonic technologies, including optical networking, silicon photonics, and high-speed optical components, offer a potential solution by enabling the transmission of enormous amounts of data using light rather than electrical signals.
For investors, however, gaining exposure to this theme can be challenging. Many photonics companies are mid- or small-cap businesses, and several are headquartered outside North America. A photonics ETF provides a convenient way to invest across the value chain while reducing the company-specific risk of betting on a single winner.
That said, investors should still be prepared for concentrated portfolios, elevated volatility, and higher expense ratios than those typically found in broad-market index ETFs. Here's what to know before investing in photonics ETFs and how the leading funds compare.
Photonics ETFs remain one of the newest corners of the ETF market, meaning investors have relatively few options to choose from.
Unlike more established sectors, this niche has yet to attract products from large asset managers such as BlackRock, Vanguard, or State Street. Instead, the market is currently dominated by ETF start-ups, white-label platforms, and specialized thematic managers looking to capitalize on growing investor interest in AI infrastructure.
That makes ETF selection particularly important. Investors should pay close attention to assets under management, as smaller funds generally face a greater risk of closure.
Fees also tend to be substantially higher than those of traditional index ETFs, and because photonics is a narrow industry, many portfolios are highly concentrated. Understanding these tradeoffs is essential before investing.
The photonics ETF universe is currently small, so this list uses less stringent screening criteria than our rankings for broader ETF categories.
Rather than eliminating funds based on size or expense ratio alone, our goal was to highlight the primary ways investors can gain exposure to the photonics theme and explain the trade-offs of each approach.
In evaluating these ETFs, we focused on several key factors. First was portfolio purity. Some funds are dedicated almost exclusively to photonics companies, while others take a broader approach by combining photonics with semiconductor equipment, optical networking, and AI infrastructure.
We also considered whether a fund is actively managed or passively tracks an index, as this affects both fees and the selection of holdings over time.
Finally, we examined practical considerations such as expense ratios, assets under management, and portfolio concentration. Given the newness of this ETF category, many funds remain relatively small, which increases the risk of closure compared with more established ETFs.
As AI models become larger and data movement becomes an increasingly important bottleneck, technologies that transmit and process information using light rather than electricity could see growing demand. That creates a potentially attractive long-term opportunity for investors.
However, exciting themes often attract significant investor attention long before the underlying businesses fully mature. As more capital flows into a narrow group of companies, valuations can become stretched, turning a promising technological trend into a crowded trade.
Even if the long-term thesis for photonics proves correct, paying too high a price can still lead to disappointing investment returns.
For most investors, photonics ETFs are best viewed as satellite holdings rather than core portfolio positions. If you believe optical technologies will play a critical role in the future of AI infrastructure, an ETF can provide diversified exposure while reducing company-specific risk.
Just be mindful of the tradeoffs, including higher fees, concentrated portfolios, and the fact that this remains a young industry with a limited number of publicly traded companies.
Investors looking for a lower-cost option may prefer the Corgi Lithography & Semiconductor Photonics ETF (EUV -2.60%). Despite its relatively short history, the fund has already accumulated approximately $465 million in assets under management while charging the lowest expense ratio in the category at 0.35%.
Unlike the previous two ETFs, EUV extends beyond pure photonics to cover much of the semiconductor and photonics value chain. Holdings include companies involved in lasers, optical components, fiber optics, LiDAR systems, silicon photonics, semiconductor manufacturing equipment, and wafer inspection technologies. This broader mandate results in a greater emphasis on larger, more established semiconductor companies.
Among the ETF's largest holdings are Taiwan Semiconductor Manufacturing Company (TSM -0.23%), ASML Holding N.V. (ASML +2.24%), Applied Materials, Inc. (AMAT -2.69%), and Lam Research Corporation (LRCX -3.11%). Investors still receive meaningful exposure to photonics businesses through holdings such as Lumentum and Corning Incorporated (GLW -6.91%), but the overall portfolio is more diversified and tilted toward larger-cap semiconductor infrastructure companies.
Tuttle Capital has built a reputation for launching highly niche thematic ETFs, and the Tuttle Capital Pure Play Photonics ETF (FOTO -4.40%) follows that tradition. The fund had about $136 million in assets under management in mid-July and charged the same 0.75% expense ratio as LAZR.
The ETF also employs revenue and operating profit screens designed to emphasize companies whose businesses are more directly tied to photonics, resulting in a greater tilt toward smaller-cap pure-play companies than many competing funds.
The portfolio is somewhat broader, holding 39 companies. Top positions again include Lumentum alongside IPG Photonics Corporation (IPGP +1.34%), a leader in high-power fiber lasers used across industrial manufacturing, communications, and advanced sensing applications.
One feature that distinguishes FOTO is its use of total return swaps for part of its exposure. A total return swap is a derivative contract that allows the ETF to receive the economic return of an asset without directly owning it, potentially improving capital efficiency while introducing counterparty risk.
The TEMA Photonics & Optical ETF (LAZR -3.51%) offers one of the purest ways to invest in the photonics theme.
Rather than tracking an index, the ETF is actively managed by Hongyi Chen, CFA, who selects a concentrated portfolio of just 24 companies based on their exposure to optical technologies and AI infrastructure.
Among its largest holdings are Lumentum Holdings Inc. (LITE -7.71%), a manufacturer of lasers and optical transceivers used in high-speed networking, and AXT Inc. (AXTI -7.21%), which produces compound semiconductor substrates, the specialized base materials upon which advanced photonic and optoelectronic chips are built.
Geographically, just under half of the portfolio is invested in U.S. companies, with meaningful exposure to China and Germany. Sector exposure is overwhelmingly concentrated in information technology, at roughly 90%, with the remainder mostly allocated to industrials.
Like many niche thematic ETFs, LAZR charges a relatively high 0.75% expense ratio, equivalent to about $75 annually on a $10,000 investment.
| Company name | Company ticker | Market capMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary. | Current price |
|---|---|---|---|
| Tema ETF Trust - Tema Optical & Photonics ETF | NYSEMKT:LAZR | $6.9 million | $41.35 |
| ETF Opportunities Trust - Tuttle Capital Pure Play Photonics ETF | NYSEMKT:FOTO | $146.8 million | $20.22 |
| Corgi ETF Trust I - Lithography & Semiconductor Photonics ETF | NYSEMKT:EUV | $488.4 million | $25.82 |
