Lumentum Holdings (NASDAQ:LITE) is emerging as a standout player in the artificial intelligence (AI) infrastructure space, with its earnings growth poised to outpace even industry giants like Nvidia and AMD. The company designs high-speed optical networking components crucial for AI data centers, benefiting from a severe shortage of these components that is driving up prices and margins.
The optical networking market is expected to grow more than tenfold from $15 billion in 2026 to $154 billion by 2028, according to Goldman Sachs. Lumentum is well-positioned to capitalize on this boom, with analysts forecasting a 135% year-over-year revenue increase to $1.25 billion for the previous quarter and a 284% jump in adjusted earnings per share to $4.22.
Lumentum's stock has pulled back 19% since October 9, offering a potential entry point at 43 times forward earnings. If the company's earnings per share reach $48.28 by fiscal 2029 and it trades at 30 times earnings, its stock price could rise to $1,448, implying a 58% gain. The company's strong growth prospects make it an attractive option for investors ahead of its earnings report on November 5.
However, before investing, consider that Lumentum was not among the top 10 stocks recommended by The Motley Fool Stock Advisor team, which has historically identified high-growth opportunities. The team's average return of 904% underscores the importance of thorough research before making investment decisions.