Amy Jensen
JPMorgan analysts are recommending investors buy the dip in Coherent (COHR) and Lumentum (LITE), two Nvidia-backed optical networking stocks that surged to record highs earlier this year but have recently pulled back around 20% from their peaks — roughly four times the broader market's 5% decline over the same period.
Key Takeaways
- JPMorgan reiterated "overweight" ratings on both Coherent and Lumentum after each fell roughly 20% from recent highs.
- Analysts maintained price targets of $380 for Coherent and $1,130 for Lumentum.
- Nvidia announced $2 billion investments in each company back in March, sparking record-high share prices.
- Lumentum's CEO stated the company was nearly sold out of production capacity through 2028.
- Year-to-date, Coherent shares are up roughly 90% and Lumentum shares have surged approximately 140%.
Why JPMorgan Sees a Buying Opportunity
In a note to clients published Thursday, JPMorgan analysts wrote that both stocks have been "weighed down by a host of concerns" following their sharp pullbacks. The analysts characterized those concerns as overblown, arguing that the selloff has created a compelling entry point for investors looking to buy into two of the AI hardware sector's most prominent names.
Price Targets and Current Trading Levels
JPMorgan maintained its price target of $380 for Coherent and $1,130 for Lumentum. Among all analysts tracked by Visible Alpha with current ratings on the stocks, Coherent carries an average target of $413, while Lumentum's consensus target stands at approximately $1,110.
As of late trading Thursday, Coherent shares were up 1% to around $358, while Lumentum shares climbed more than 3% to $883. Despite the recent pullback, both stocks remain strong performers in 2025 — Coherent has jumped roughly 90% year-to-date, while Lumentum has surged approximately 140%.
The Nvidia Connection and S&P 500 Inclusion
The dramatic rallies that carried both stocks to record highs were fueled largely by a series of high-profile announcements in March. Nvidia (NVDA) disclosed that it was investing $2 billion in each company and would collaborate with both on future products. News that both Coherent and Lumentum were joining the S&P 500 provided additional upward pressure on share prices.
Lumentum received a further boost when its CEO stated that the company was nearly sold out of its entire production capacity through 2028, signaling exceptionally strong demand for its optical components in AI infrastructure buildouts.
Outlook
JPMorgan's reaffirmed ratings and price targets could help restore positive sentiment around both Coherent and Lumentum. If the analysts' view proves correct that current concerns are overblown, the recent dip may represent a reset before both stocks resume the kind of momentum that propelled them to record highs earlier this year. Investors will be watching closely for any new product collaboration updates with Nvidia or further signals on co-packaged optics adoption as potential catalysts heading into the second half of the year.
