Photonics ETFs Emerge as AI Infrastructure Investment Opportunity

Ciena Corp. rebounded as much as 14.3 percent in intraday trading on Tuesday to $445.36 apiece, helped by peer Marvell Technology's growth outlook for the optical interconnects sector. At its recent Investor Day, Marvell said it expects the industry to grow by 60 to 70 percent to about $65 billion through 2030, with switching and storage alone reaching $85 billion, or a compounded annual growth rate of 40 percent. Those figures were markedly higher than Ciena's own 30 percent growth outlook for its business by 2029. Bernstein initiated coverage with an outperform rating and a $440 price target, acknowledging near-term supply constraints but calling the stock undervalued, while Evercore maintained an outperform rating and a $550 price target, citing optimism that Ciena can achieve more than $25 in earnings per share. Hedge fund holders in Ciena rose to 81 in the second quarter from 73 in the first, with combined holdings up 2 percent to $3.997 billion from $3.913 billion quarter-on-quarter.

Fabric.AI has engaged global management consulting firm Kearney to lead and accelerate the commercialization strategy for its Neural I/o MicroLED-based optical interconnect platform. The company, together with its development partner Kopin Corporation, has executed non-disclosure agreements with several leading semiconductor and data center technology companies, with technical discussions already underway. Kearney's mandate is to convert that early engagement into a structured commercial pipeline by sharpening product positioning, identifying and prioritizing target customers and channel partners, and preparing Fabric.AI for active sales discussions expected to begin after planned hardware demonstrations in early 2027. James Altucher, an independent strategic advisor to Fabric.AI, said Neural I/o addresses the two constraints defining the next generation of AI data centers, how much data can be moved and what it costs in power to move it, and that Kearney's role is to help turn confidential discussions into commercial relationships. Fabric.AI trades on Nasdaq under the ticker FABC, while Kopin Corporation trades under KOPN.

Meta announced Petal on Sept. 21, a roughly 4,300-mile subsea cable connecting the U.S. and France that is expected to enter service in 2029 and will be the first to deliver petabit-scale capacity across an ocean. The cable will carry 1 petabit per second, or about 125,000 gigabytes per second, double what today's most advanced transoceanic cables can handle, using two-core fiber that fits two light paths inside each strand. Petal is one piece of a much larger seafloor empire: Meta says it has invested in more than 20 subsea cable projects touching every continent except Antarctica, led by Project Waterworth, announced in February 2025, which will stretch more than 31,000 miles and connect the U.S., Brazil, South Africa, India, and other regions across five continents. Petal is being developed with Japan's NEC and Sumitomo Electric Industries, with French telecom Orange handling the landing on France's Atlantic coast, while Waterworth will be wholly owned by Meta, only its third solely owned cable according to telecom research firm TeleGeography. Meta has not disclosed what Petal or Waterworth will cost, but TechCrunch reported before Waterworth's announcement that the project could top $10 billion, a small slice of the company's expected capital expenditures of $130 billion to $145 billion this year, nearly double the $72.2 billion it spent in 2025.

Coherent shares jumped 10.5% in the afternoon session after Bernstein rated the materials and photonics company Outperform with a $350 price target, citing optical-module upside as data-center switches move to higher speeds. According to Streetinsider, Bernstein framed $350 as roughly 24% upside, valuing the stock at 22 times estimated 2028 earnings per share of $16, and argued optical-module demand should keep expanding with faster networking gear. Citi commentary tagging Coherent as an AI hardware beneficiary reinforced the bullish AI-infrastructure read-across, alongside investor focus on Coherent's PhotonLink optics platform and an AI security demo amid a broader bid in networking names. The move follows a 5.2% gain two days earlier on news that Coherent demonstrated scalable physical-layer security for artificial intelligence infrastructure developed alongside CUbIQ Technologies. Coherent is up 63.1% since the start of the year, but at $317.01 per share it still trades 25.7% below its 52-week high of $426.89 from June 2026.

Optical networking stocks rallied Thursday after Bernstein initiated coverage of the group with an Outperform rating, calling the companies structural AI winners. Coherent jumped 11%, Lumentum rose 7%, Ciena gained 7%, and Arista added 0.4%. Coherent led the move after launching PhotonLink, an optics platform for AI infrastructure that packages its services, photonics technologies, and components including lasers, fibers, and detectors into one platform for AI data centers. The company said it already has 20 customer engagements split between co-packaged optic and near-packaged optic assemblies, plus five engagements in emerging chip-to-chip connectivity. The gains extend a strong 2026 rally for the group, with Coherent up 73%, Lumentum up 183%, Ciena up 62%, and Arista up 56% year to date.