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Coherent (COHR) Is Down 8.4% After NVIDIA-Backed AI Optics Expansion News - Has The Bull Case Changed?

Simply Wall St · 1d ago
  • In recent weeks, Coherent has reported a 41% increase in its datacenter segment and a multi-year backlog of AI-related optical orders extending through 2028, while NVIDIA committed US$2 billion to support the company’s Texas indium phosphide expansion.
  • This combination of strong datacenter demand, a deep AI infrastructure backlog, and progress on advanced technologies like co-packaged optics is drawing renewed attention to Coherent’s role in the optical backbone of AI computing.
  • With this backdrop of surging datacenter demand and NVIDIA’s sizable investment, we’ll explore how the news could reshape Coherent’s investment narrative.

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Coherent Investment Narrative Recap

To own Coherent today, you need to believe that AI datacenter optics will remain a core bottleneck in computing and that Coherent can translate its technology and manufacturing scale into durable profitability. The latest 41% datacenter growth, multi year AI backlog and NVIDIA’s US$2 billion commitment appear to support this near term growth catalyst. At the same time, they amplify the biggest current risk: heavy capital spending on new capacity that may not earn attractive returns if demand cools.

The most relevant recent announcement here is NVIDIA’s multiyear agreement, including its multibillion dollar purchase commitment and US$2 billion investment tied to Coherent’s Texas indium phosphide expansion. This aligns directly with the AI datacenter optics story and reinforces the importance of Coherent’s advanced platforms, such as co packaged optics and 800G to 1.6T transceivers, as key potential earnings drivers if customer roadmaps hold up through 2028 and beyond.

Yet behind the AI momentum, investors also need to be aware of the risk that heavy fab expansion and rising fixed costs could...

Read the full narrative on Coherent (it's free!)

Coherent's narrative projects $15.7 billion revenue and $2.6 billion earnings by 2029. This requires 33.6% yearly revenue growth and about a $2.2 billion earnings increase from $400.6 million today.

Uncover how Coherent's forecasts yield a $384.45 fair value, a 25% upside to its current price.

Exploring Other Perspectives

COHR 1-Year Stock Price Chart
COHR 1-Year Stock Price Chart

Some of the lowest tier analysts were already cautious, assuming about US$14.9 billion of revenue and US$2.5 billion of earnings by 2029, and worried that today’s aggressive indium phosphide build out could turn into overcapacity if AI optics demand slows, so this new NVIDIA backed surge in orders might either ease those concerns or make the eventual test of that pessimistic view even sharper.

Explore 5 other fair value estimates on Coherent - why the stock might be worth 28% less than the current price!

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.