Coherent Corp. is expanding its indium phosphide manufacturing capacity to double by late 2026 and more than double by 2027, targeting growing AI data center connectivity demands. The company is developing advanced optical technologies including 400G-per-lane connectivity and energy-efficient solutions. COHR stock has gained 162.6% over the past year with rising fiscal 2027 earnings estimates, currently rated as a Zacks Rank #2 (Buy).

Zacks highlights three AI infrastructure stocks as attractive buying opportunities during market pullback: Sandisk benefits from AI-driven memory demand with extraordinary margins and 143% projected revenue growth; Lumentum leads optical networking with sold-out components through 2029 and 107% projected revenue growth; Jabil provides advanced manufacturing services with 24% revenue growth guidance and reasonable 17.7x forward earnings valuation.

Recent market corrections in AI and semiconductor stocks are creating attractive buying opportunities for investors willing to look beyond short-term volatility. Three stocks stand out as compelling investments in AI infrastructure: Sandisk benefits from extraordinary demand for memory and storage with 372% revenue growth; Lumentum leads in optical networking with products sold out through 2029; and Jabil offers diversified manufacturing services with accelerating AI revenue growth. All three companies show strong fundamental tailwinds and supply constraints that should persist well beyond the current correction.

Lumentum Holdings (LITE), an optical and photonic products provider, receives a #3 (Hold) rating from Zacks with a VGM Score of B. The stock demonstrates strong momentum with a Momentum Style Score of A and 19.2% gains over the past four weeks. One analyst raised fiscal 2027 earnings estimates by $0.13 to $21.40 per share, with the company showing a +9.8% average earnings surprise.

On October 12, 2026, the Dow Jones rose 0.38% while the S&P 500 and Nasdaq declined as investors rotated into value sectors away from technology. Memory chip stocks and semiconductor names faced pressure amid valuation concerns, while Meta Platforms gained on its new AI model launch and Figs surged over 12%. Bank earnings and inflation data are expected this week.

Lumentum stock fell 9.8% on Monday following cautionary comments from Broadcom CEO Hock Tan over the weekend. Tan suggested many investors don't understand their AI investments and compared enterprise AI token usage to a 'casino,' questioning whether current AI spending will lead to sustainable, profitable business models. This sparked a broader pullback in AI infrastructure stocks, hitting Lumentum particularly hard after it surged to all-time highs the previous week when its CEO announced near sell-out status through 2029.

Zacks has added five stocks to its Strong Buy list based on positive earnings estimate revisions over the last 60 days. The stocks include Lumentum Holdings (optical/photonic products), Werewolf Therapeutics (cancer biopharmaceutical), Perion Network (digital advertising), Goldman Sachs BDC (business development), and Griffon Corporation (diversified management).

Coherent Corp. (COHR) has surged 190% over the past year as a major beneficiary of AI infrastructure demand. The company is ramping 1.6T transceivers and expanding optical subsystems through PhotonLink, with fiscal 2027 revenues projected at $10.68 billion (50% YoY growth) and EPS at $9.38 (67.2% growth). Strong demand visibility extends into 2028, though valuation trades at a premium of 32.06x forward earnings versus the industry's 20.77x.

Applied Optoelectronics (AAOI) saw Q2 data center revenue surge 140.4% with 800G sales up over tenfold, driven by AI infrastructure investments. The company expects strong Q3 growth with revenues of $255-290 million. However, supply constraints, rising competition, and premium valuation at 5.41X P/S ratio present headwinds. AAOI carries a Zacks Rank #3 (Hold) rating.

AXT, Inc. reported record Q2 2026 InP revenues of $30.7M and total revenues of $47.6M, driven by accelerating demand for indium phosphide substrates in AI data centers and optical connectivity. The company has an InP backlog exceeding $100M, is doubling 2026 capacity, and has secured multi-year customer agreements. However, China export permit requirements pose a potential risk to shipments and revenue recognition.

Zacks Premium offers investment research tools including Style Scores (Value, Growth, Momentum, and VGM) that work alongside the Zacks Rank system to help investors identify stocks with the best performance potential. The article highlights Lumentum (LITE) as a #2 Buy with strong growth prospects, forecasting 145.7% year-over-year earnings growth. The Zacks Rank system has historically outperformed the S&P 500 with an average annual return of +23.86% since 1988.

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