Not Nvidia. Not AMD. This Is the Best Artificial Intelligence (AI) Stock to Buy in November
Key PointsLumentum's earnings are growing at a terrific pace, a trend that's likely to continue amid the severe shortage of optical networking components.
In November, the spotlight turns to Lumentum Holdings (LITE) as a potential outperformer in the artificial intelligence (AI) infrastructure space. The semiconductor giants Nvidia and Advanced Micro Devices (AMD) will report strong earnings driven by the demand for their chips by various entities. However, Lumentum's unique position in high-speed optical networking could make it a standout performer.
As AI data center clusters require rapid data transport, Lumentum's optical networking components are in high demand. Yet, there is a severe supply shortage, which could drive up prices and boost Lumentum's margins. Analysts are expecting a significant revenue increase for Lumentum, with revenue forecasts reaching $1.25 billion for the previous quarter, and adjusted EPS potentially surging by 284% to $4.22.
Goldman Sachs projects a staggering 10x increase in optical networking revenue from $15 billion in 2026 to $154 billion in 2028. Lumentum is well-positioned to capitalize on this growth by ramping up 1.6T transceiver production in 2027, which could further improve its margins. With a current valuation of 43 times forward earnings, Lumentum's stock could yield a potential gain of 58% if it meets or exceeds earnings expectations.
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