Ingalls Investment Management, LLC - Stewart Asset Management Team on Lumentum Holdings Inc.
Thesis
The fund initiated a small position in Lumentum, a leader in optical-networking hardware used to move data between AI chips, servers and data centers. The investment case is that sustained AI infrastructure spending is triggering an optical upgrade cycle from which Lumentum should benefit. Demand currently exceeds supply and customer agreements extend through 2027 as data-center capacity expands. Realizing the opportunity depends on successful capacity expansion and continued willingness by hyperscalers to invest heavily in AI infrastructure.
“We believe AI infrastructure spending is driving an optical upgrade cycle from which Lumentum may benefit.”
Key risks
- Revenue is concentrated among a small number of customers
- Product timelines could shift
- Emerging technologies could disrupt current products
- Capacity expansion or hyperscaler AI spending could disappoint