In the video clip below from a recent episode of The AI Investor Podcast from 24/7 Wall St., the team discusses Coherent Corp. (NASDAQ: COHR), a smaller stock with a market capitalization of approximately $11.5 billion.

While it might seem counterintuitive to label an $11.5 billion company as small, in today’s market landscape, it falls below the S&P 500 threshold.

Coherent is a diversified technology company specializing in photonics and laser technologies. About 50% of its revenues are derived from communications, a sector poised for significant expansion due to the evolving needs of data centers. Specifically, the growth of interconnects—components that link GPUs across massive clusters—is expected to surge as demand for high-performance computing and AI applications increases.

We believe that as investors seek new opportunities in this space, Coherent will emerge as a top contender. Although it’s not the only player—companies like Credo Technology Group, Lumentum Holdings, Marvell Technology, and Broadcom are also involved—we are introducing Coherent now because of its stability and strong leadership. The CEO’s strategic vision positions the company for impressive returns over the next five years.

The team discusses why they want to capitalize on this burgeoning opportunity in data center interconnects. This strategy offers investors exposure to a trend that is often overlooked in mainstream financial media like CNBC but holds significant growth potential.

By focusing on this niche yet critical component of data center infrastructure, we aim to provide a comprehensive investment strategy that taps into the future of high-speed communications and computing. Listening to insights like these gives you an edge, exposing you to opportunities that are not widely discussed but are fundamental to the next wave of technological advancement.

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Transcript

[00:00:00] David Hanson: Yeah. So let’s move on to our final buy that we’re going to be sharing in this initial kind of introduction to the portfolio. And it’s another company that we talked about last week and that’s coherent. This is the smallest company that we’re going to be adding. So again, listeners who did not listen last week, go back, you can get a deeper dive on coherent, but let’s just talk a little bit more about why now, why are we adding it to the portfolio?

[00:00:21] Eric Bleeker: Yeah. As you mentioned, it’s the smallest of the group at 11. 5 billion. That is sub S and P 500 level. I know it’s wild to say 11. 5 billion company and small. It is in today’s market. It’s a diversified company. Half of its revenues are going towards communications, which I see as a big play within the future of data centers.

[00:00:44] Eric Bleeker: So the idea is that interconnects. That are connecting all of these GPUs together across these massive clusters are going to see a massive wave of growth. We’re going to talk about that in our trends for next year. My belief is when investors go looking for investing ideas, they’re going to wind up on Coherent as a top play.

[00:01:04] Eric Bleeker: Now it’s not the only company in this space. You can look at Credo Lumentum, Marvell, Broadcom all have connections to this networking opportunity. It’s a very Long list. I think we’re going to over allocate towards this idea. I think by the end. We could have 25 percent of the capital for the portfolio, just going for this one opportunity, but I’m introducing coherent today because I think it’s a pretty stable company.

[00:01:32] Eric Bleeker: I love the leadership in the company. I think the CEO has a great strategy that could lead to impressive returns across the next five years. So I’m going to do 10, 000 or about 2 percent of the portfolio. That’s the same number I did for synopsis. But again, I think this numbers. Going to go up and it may go up with further investments to coherent.

[00:01:54] Eric Bleeker: It’s certainly going to go up with other companies in the space, but it gives investors exposure to a trend that I would just estimate, most people watching this actually don’t have exposure to this and it’s not going to be something that you watch CNBC and they’re like, let’s talk about interconnects in the data center today, right?

[00:02:12] Eric Bleeker: You’re going to get exposure for this. Listening to a podcast like this, and you’re not going to just get exposure to it, you’re going to get a complete stretch.

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