Stewart Asset Management Team at Ingalls Investment Management, LLC on Lumentum Holdings Inc.
Thesis
Stewart initiated a small position in Lumentum during the second quarter. Lumentum is a leader in optical networking hardware that moves data between AI chips, servers and data centers, positioning it to benefit from the infrastructure required to scale artificial intelligence. Stewart believes AI infrastructure spending is creating an optical upgrade cycle, with demand currently exceeding supply and customer agreements extending through 2027. Realizing the opportunity depends on Lumentum successfully expanding capacity and hyperscalers continuing 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 the opportunity
- Execution risk around capacity expansion and continued hyperscaler AI spending