Lumentum and Coherent shares lead S&P 500 gains — MarketWatch
Shares of optical networking companies Lumentum Holdings and Coherent became the top gainers in the S&P 500 index on Wednesday. Lumentum’s shares rose 9.6% by the close of trading, while Coherent’s gained 6.9%, despite an overall market decline.
As MarketWatch reports, the increase may have partly been a recovery after Monday’s sell-off. At that time, the market was concerned about a possible slowdown in spending on artificial intelligence and slower development of AI models.
Demand for infrastructure
Direxion Head of Capital Markets Jake Behan said that traders prefer supply-chain segments with tangible demand and spending already planned. According to PurePlay ETFs CEO Joseph DeYonker, manufacturers of networking equipment, servers and other physical infrastructure are indicators of underlying demand for AI infrastructure.
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DeYonker noted that investors in the artificial intelligence sector are becoming more selective and are focusing on companies that have orders and are expanding production capacity. As AI clusters grow, the volume of data transmitted between graphics processors and between data centers increases, making optical connectivity increasingly important for data center construction.
Volatility and rates
At the same time, DeYonker warned that shares of optical-sector companies could become more volatile as investor expectations rise. Freedom Capital Markets Head of Technology Research Paul Meeks called the share-price move a rebound after concerns about slower development of AI models. He expects spending on artificial intelligence infrastructure to continue, but allows for unstable trading in the coming months due to possible delays in large data center projects.
On the same day, the Federal Reserve raised interest rates by 0.25 percentage points and said it expected at least one more increase. After a press conference by Fed Chair Kevin Warsh, the S&P 500 turned lower and ended the session down 0.4%.
