The AI optics trade is taking a breather. Shares of Applied Optoelectronics (NASDAQ:AAOI) are down 14% in midday trading, while Coherent (NYSE:COHR | COHR Price Prediction) is off 10% and Lumentum (NASDAQ:LITE) is sliding 7%.
The selloff is sector-wide. Ciena (NYSE:CIEN) is lower by 10% and Fabrinet (NYSE:FN) is down 8%, confirming this is correlated basket selling rather than a single-name issue. Volume on AAOI exploded out of the gate, with 756,465 shares changing hands in the opening 15 minutes.
The move comes after one of 2026’s most explosive rallies. Heading into today, AAOI stock was up 412% year to date (YTD), Lumentum stock was up 156%, and Coherent stock was up 87%. For broader context on the AI infrastructure buildout fueling these names, see our recent coverage of Corning’s optical capacity expansion.
Coherent Beat, but Not by Enough
The catalyst started after yesterday’s close. Coherent reported fiscal Q3 2026 results with non-GAAP EPS of $1.41 versus $1.3943 consensus and revenue of $1.81 billion, beating by just 1% on the bottom line. That’s the company’s smallest beat in four quarters.
Coherent’s Datacenter and Communications revenue still surged 41% year over year (YoY) to $1.36 billion, now 75% of total revenue. CEO Jim Anderson cited “exceptionally strong demand across our datacenter and communications businesses.”
Still, Applied Optoelectronics is derisking ahead of its own earnings tonight. The company reports after the market close on May 7, with management guiding Q1 2026 revenue to $150 million to $165 million. When a stock is up triple digits in four months, even modest profit-taking ahead of a print can snowball.
Why the Optics Group Trades Together
These names share AI data center exposure, hyperscaler customer concentration, and overlapping product roadmaps in 400G/800G/1.6T transceivers and co-packaged optics. Lumentum’s last quarter underscored the demand backdrop, with revenue up sharply year over year and a sizable optical circuit switch backlog. Ciena previously reported strong growth in Direct Cloud Provider revenue, with management describing AI demand as broad-based.
The structural thesis remains intact. Yesterday’s $500 million optical connectivity deal between NVIDIA (NASDAQ:NVDA) and Corning (NYSE:GLW), which expands Corning’s optical capacity tenfold and adds three new U.S. factories, highlighted just how aggressive the AI infrastructure buildout has become. That’s the same demand pool feeding this peer group.
The cooling is also showing up in sentiment. Lumentum’s composite sentiment score has fallen 30.55 points over the past seven days, and Reddit chatter migrated from r/stocks to WallStreetBets, where the sentiment score dropped to 18 (very bearish).
What to Watch
The Applied Optoelectronics earnings call tonight is the next major data point. A strong print and reaffirmed full-year outlook (management has signaled FY2026 revenue could be substantial) could re-anchor the group. A miss or softer guide could extend today’s de-risking into Friday.
Keep an eye on whether AAOI stock holds $150 into the close, and whether COHR shares stabilize above $305. Today’s action looks like consolidation after a parabolic run rather than a thesis break, and the next 24 hours of earnings flow will set the tone for the rest of the week.
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