# These AI Stocks Will Make Millionaires By 2029 Source: https://www.youtube.com/watch?v=zYeJZu1hkdM Recap page: https://rapidrecap.app/video/zYeJZu1hkdM Generated: 2026-08-24T23:09:01.073+00:00 --- ## The Gist Coherent is the superior investment choice over Lumentum due to its vertically integrated manufacturing and dominant scale in indium phosphide production. Both optical networking stocks offer tremendous upside driven by AI datacenter demand, but Coherent has secured a multi-billion dollar partnership and a massive supply advantage. ## Quick Overview Coherent emerges as the preferred investment between the two optical networking stocks analyzed in the video, though both companies benefit heavily from AI infrastructure growth. The analysis evaluates Coherent and Lumentum based on their market position, financial results, capital expenditures, and supply chain bottlenecks related to indium phosphide lasers. Coherent wins out because its comprehensive supply chain control and larger multi-year commitments from NVIDIA provide better downside protection and higher growth scaling. **Key Points:** - Coherent reported two billion dollars in revenue for its latest quarter, marking a 34 percent year-over-year increase with gross margins hitting 38.5 percent. - Lumentum achieved one billion dollars in revenue for its fourth fiscal quarter, representing a 109 percent year-over-year increase with adjusted gross margins at 50.4 percent. - NVIDIA invested two billion dollars into both Coherent and Lumentum on March 2, 2026, to secure advanced optical networking supplies for its AI datacenters. - Indium phosphide is currently facing a severe global shortage because laser demand exploded with the AI revolution and supply is concentrated among only three manufacturers. - Coherent operates vertically integrated facilities producing six-inch wafers, allowing them to quadruple production capacity by the end of next year. - Lumentum spends roughly 60 cents in capital expenditures for every dollar of revenue generated, whereas Coherent spends approximately 14 dollars in capital expenditures for every dollar of revenue. - The global market for optical transceivers is projected to grow from 23 billion dollars in 2025 to 112 billion dollars in 2031, representing a compound annual growth rate of 30 percent. ![Screenshot at 16:59: The core thesis summary comparing scaling, performance, and efficiency pillars for datacenter optics.](https://ss.rapidrecap.app/screens/zYeJZu1hkdM/00-16-59.jpg) **Context:** As artificial intelligence models grow exponentially, the primary bottleneck has shifted from raw chip compute power to the speed at which data moves between processors and datacenters. Traditional copper wiring suffers from high signal loss and heat dissipation over long distances, forcing datacenters to transition rapidly to optical fiber networks powered by advanced laser transceivers. ## Detailed Analysis The video provides a deep fundamental and technical comparison between Coherent and Lumentum, two optical networking companies poised to capture massive growth from AI datacenter expansion. Coherent ticker symbol COHR demonstrates absolute vertical integration by manufacturing its own indium phosphide wafers, laser chips, and finished transceivers, giving it superior control over product quality and supply scaling despite a high capital expenditure profile. Lumentum ticker symbol LITE operates with higher gross margins and impressive revenue acceleration, but relies more heavily on external material sources and carries exposure to single-market supply constraints. Ultimately, both stocks trade in a high-growth sector where optical networking is replacing legacy copper infrastructure, but Coherent takes the top spot for its aggressive capacity expansion and NVIDIA backing. ### Coherent Financials and Vertical Integration Coherent maintains a dominant market position through end-to-end manufacturing control and surging financial performance. - Coherent generated two billion dollars in revenue last quarter, up 34 percent year-over-year with gross margins expanding to 38.5 percent. - Adjusted full-year earnings per share reached five dollars and sixty-one cents, representing a 59 percent increase compared to the previous year. - The datacenter and communications segment accounted for 5.3 billion dollars out of their 7.1 billion dollar total revenue over the past year. - Coherent operates vertically integrated production lines, manufacturing everything from raw six-inch indium phosphide wafers to finished 800G and 1.6T transceivers. ![Screenshot at 09:09: Coherent quarterly financial results showing massive revenue acceleration and margin expansion.](https://ss.rapidrecap.app/screens/zYeJZu1hkdM/00-09-09.jpg) ### Lumentum Financials and Operating Metrics Lumentum delivers explosive revenue growth driven by soaring demand for electro-absorption modulated lasers. - Lumentum reported one billion dollars in revenue for its final quarter, representing a 109 percent increase year-over-year. - Adjusted earnings per share came in at three dollars and twenty-three cents, up 267 percent from the previous year. - Adjusted gross margins reached 50.4 percent, demonstrating immense pricing power amid component shortages. - Lumentum spent 451 million dollars on capital expenditures last year against 751 million dollars in cash from operations. ![Screenshot at 12:50: Lumentum fiscal fourth quarter non-GAAP results displaying 109 percent year-over-year revenue growth.](https://ss.rapidrecap.app/screens/zYeJZu1hkdM/00-12-50.jpg) ### The Indium Phosphide Bottleneck and Market Risks Supply chain vulnerabilities pose significant risks to both companies despite booming industry demand. - Most of the world's raw indium phosphide supply comes from just three companies in Japan and China. - Indium phosphide is listed on China's export control list, creating geopolitical risks for manufacturing facilities located in Beijing. - Both Coherent and Lumentum carry substantial capital expenditure requirements to scale production, meaning any operational delay hits cash flows severely. - The total optical transceiver market is projected to expand from 23 billion dollars to 112 billion dollars by 2031. ![Screenshot at 07:16: Global optical transceiver market growth projections scaling from 23 billion to 112 billion dollars.](https://ss.rapidrecap.app/screens/zYeJZu1hkdM/00-07-16.jpg)