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Lumentum (LITE) is sold out of optical components through early 2029, according to CEO Michael Hurlston. Hurlston said the company could not meet about 70% of demand for certain products through 2027. In my view, Lumentum does not need to prove that artificial intelligence (AI) networking demand exists. It needs to produce enough components to serve that demand.
Lumentum's main advantage is that it sits on a scarce input: The lasers that power AI data-center optics. Its electro-absorption modulated lasers (EMLs) are in a supply crunch, helping the company with pricing power and margin expansion. This supply shortage also spreads across the company’s continuous wave and ultra-high-power lasers. The best part about Lumentum is that demand for its lasers will seemingly always be there, whether the industry moves toward pluggable modules, near-packaged optics, or co-packaged optics.
