Shares of Lumentum (NASDAQ:LITE) and Coherent (NYSE:COHR) surged in premarket trading after artificial intelligence leader Nvidia (NASDAQ:NVDA) announced plans to invest $2 billion in each company to accelerate development of next-generation optical technologies.
Under the agreements, Nvidia will also make purchase commitments for the companies’ products, which are designed to improve data transfer speed and efficiency inside data centers. The capital injection is expected to support both research and development efforts as well as expanded manufacturing capacity.
Bloomberg Intelligence technology analyst Jake Silverman said the collaboration “positions Lumentum to remain a key supplier for ultra high-powered lasers for co-packaged optics (CPO)” and noted that, for Coherent, the deal “points to a sustained position across multiple products as Nvidia expands its optical transceiver and co-packed optics (CPO) businesses.”
Both companies specialize in optical communication technologies that use light instead of electrical signals to transmit data. Their co-packaged optics solutions integrate optical components directly into chip packages, enabling faster data movement while generating less heat compared with traditional copper-based connections.
Silverman added that Nvidia’s purchase commitments help reduce execution risk tied to expansion plans at both firms. The agreements are nonexclusive, allowing Lumentum and Coherent to continue supplying optical solutions to other customers.
Optical communications company POET Technologies also gained momentum following the announcement, rebounding in premarket trading after earlier weakness.