The Next Tech Boom Is Optics (3 Stocks to Buy Now)

It's one of the fastest growing sectors of the  market right now, but these are names you may   not have heard of yet. Joining us today is Lucas  Downey with Tradesmith. He is going to be going   over three optic stocks and talking about  this sector and why there is still a ton of   opportunity for growth here. Lucas, I'm so glad  to have you on the show. Always good to have new   guests here. Would love to start out with your  take on kind of the whole AI market. I know that   is your specialty. It's an area that you are  constantly looking in and that big discussion   this week especially is how much room can be left  in this AI story. Have we reached the the full   growth or is there still opportunity for investors  here? Bridget, thanks for having me. Yeah, I mean   AI has really taken everybody by storm including  Wall Street. Over the past year, we have really   come to understand that there are layers to the  AI data center buildout. I'm sure you're hearing   that from other guests. they're building them day  after day across this country and even globally.   So what I try to do is look at all of the layers  and there's really five key tenants, five pillars   to an AI data center. So the first part right that  most of us know is kind of the infrastructure.   So you think about land, you think about site  development and all that type of stuff. Then you   get into power, right? Because you got to power  all of these data centers. Okay? So that's your   utilities, your generators, things like that. Then  you got to cool everything. So there's that third   layer that's cooling. Then you get into compute  and memory. It's kind of like the brain of the   AI data center. Micron just had blowout earnings.  So this has been kind of the key bottleneck over   the past year. And then as we're getting into  today is that fifth layer that's networking and   connectivity. So you got to think in terms of  listen there's high-speed networking, there's   pipes, there's fiber, there's optics. All of this  is being refreshed as people find new technologies   to build these data centers. Yeah. Every area  you just talked about, all those bottlenecks of   where there's so much demand to build out all  of the AI infrastructure around the country,   really around the world, is where we're seeing  so much growth. Again, Micron is a great thing to   bring up this morning because it's what everyone's  talking about. Their earnings are unreal.   Um seeing I think at least something over 80%  margins, which is just unheard of in a market. So   it just shows how much money is flowing into this  area right now. And I also that word bottlenecks,   we had one of your colleagues, Keith Kaplan, the  CEO of Tradesmith, was on just last month talking   about those AI bottleneck. So I'll link that  interview at the end of this one. So make sure you   you take a look at that where he talks about some  of those areas specifically. But this optics area,   the the cables involved in the buildout of the  AI data centers, it's not something that on this   show we've covered all too much. which I know  we've heard a few different names here and there   because they've seen tremendous growth, but the  names that you have for us today are very, very   different. So talk a little bit more about what  this entire little group of stocks have in common,   why there's such demand for them in this AI story  right now. So you know, if you think about the AI   infrastructure capex, it's approaching a trillion  dollars, right? So this is big money that is being   spent to upgrade basically the newest technologies  out there. And so as it relates to networking   and connectivity, there's this huge global shift  that's happening away from copper and into optical   links. So this is glass. This is using light,  right? And so this gives these data centers a   lot of interesting advantages. One is it can be  less latency. Speed is very important, right? As   we go in, we use these large language models,  everything's kind of refreshing and caching,   right? because there's just so much compute  that is passing through all of the wires. Also,   um there's less heat that is involved when  you have glass and fiber, right? And so that   means you don't have to cool it as much. So  there is a cost savings and that is why there   is this huge buildout that is happening. And as  we get into other stocks that we'll talk about,   there are some players that are getting these  multi-year deals with hyperscalers, right? So this   isn't like a 2026 story. This is till 2030 and  beyond. And that just goes to show just how big of   a buildout this is. And again, I just want to use  the word bottleneck. There is only so much of this   uh component to go around that we are starting  to see bottlenecks in the optics space. We're   going to get to the three names where you see  a lot of those bottlenecks happening right now.   But before we do, I have one other burning  question and that's that these companies, they're   not brand new. This isn't like new technology,  is it? I feel like this is something that's been   around for a while. It's just being re repurposed  and the demand is being renewed because of these   data center buildouts. Is that right? That's  correct. So, yes, some of these companies have   been around for over a hundred years. Companies  are starting to see, wow, new technologies are   coming about. Oh, look at what they're building  out. And then you start to see that, oh,   I want to get that technology into into our data  centers, right? And so when you think of optics,   it's really uh five to six different layers to  this. So the first thing is, you know, you got to   generate the light. Second thing is that it's got  to travel through the fiber cables. Then you kind   of have this traffic direction, right? That you  have to the signaling. Then you have the physical   connections, right? Putting everything together.  So this is all the suppliers. Then you have the   manufacturing, the optical components, and then if  you get real nitty-gritty, you really have to keep   the signals clean. So there's a cleaning component  that goes into um all of this ecosystem. Yeah, you   are clearly understand the technicals very well.  And I know that this sector, the AI buildout,   is your specialty and it's what you write about in  your newsletter, the Tradesmith Investment Report.   If you want to learn more from Lucas and his team  at Tradesmith with specific information on some of   the biggest latest trends in the AI buildout,  well, good entry points on different names   entering the race, and then times when it's time  to cash out on some of the names you've invested   in, that's what this newsletter covers. You can  get a special offer for our Market Beaters today   by scanning the QR code or going to the link in  the description to sign up for the investment   report newsletter today through Tradesmith. Again,  we've got that link for you in the description.   Okay, Lucas, let's get into your list today.  And the first optic stock that you are looking   at. The first one we're going to be looking at  is Anthanol. And this is ticker AP. Amphanol.   It's one of the world's largest manufacturers of  electronic connectors and interconnect solutions.   So, think about connections. They had some  big uh acquisitions last year that's really   helping them in the optics space. But I think  the easiest way to think of them is, you know,   they're not making the lasers or the chips, but  it's more that they are leading in the connectors,   the cables, assemblies, all of that. It's a  $200 billion market cap firm, and they just   had one of the biggest earnings blowouts of the  season. So, revenues came in at 7.62 billion.   This is way above the street analyst estimates  of 7.08 billion. EPS also beat. Their guide was   well above. And so I think these are the types  of companies, right? They come out, they report,   they beat, they raise, they tell you that, you  know what, demand is very, very robust. And so   these companies get rerated. And so this is one of  my favorite names to play the optical move. Yeah,   that earnings report is what stood out to  me. I was just looking at it and was like,   "Wow, this is quite an earnings beat for this  company." Is this the first quarter that we've   seen that from this company? Is it just starting  or have they had a track record over the last   few quarters of kind of similar story? They've  had a track record of beating, but I think the   magnitude of this latest beat is what kind of got  everybody on their side of the boat. You start to   see analysts start to revise their numbers higher.  That is a key note that Wall Street's been behind   the ball on this name. And again, it's just one  of these multi-year, you know, segments that are   playing out through the data center buildout. So,  this is a great company. It's not slowing down   anytime soon. Yeah, that's the question everyone  has is, is it going to slow down? Can this growth   story continue? Every time we talk about these  kinds of AI infrastructure stories, I hear from   viewers who say, "Well, it's already gone up so  much." And this one has had a tremendous year.   It's up about 71% in the last year. It It's not  the biggest AI growth story we've seen in a year,   but it is already doing really really well. So,  what is your uh outlook for growth for this one   over the next few years? What's your time horizon  looking at this stock too? Okay, so time horizon   is very important. So we're definitely looking  at multi-year and this is one of those names that   have doubledigit revenue and earnings growth uh  out for the next few years. So again, it's not a   2026 or even 2027 story out to 2028. This company  is really starting to see the inflection points   right now. So this is a core name and a space  that really isn't stopping. And as we get into the   second name, I think it'll make it clear just how  big and just how widespread, you know, the whole   optical buildout really is. Now, before we get  to that other name, another quick question about   the optics uh layout because we don't talk about  it too often on the show. So, for some people,   it's really understanding uh the unique space that  this company fills compared to the others we're   going to get to. I really want to see a little bit  about that competitive space in the optics area.   Do some of these companies work together? Are they  directly competing? Do they do they fill different   needs within the optic space? Yeah. So, Anthenol,  I mean, it's really physical connections. So, you   think high-speed connections, interconnects. So,  they're linking all of the components, right? So,   you got to think racks, got to think servers,  you got to think systems. So, every connection,   it counts in the world when you're talking about  moving in nanoseconds, right? And so, this is uh   a lot of different connections over a very robust  ecosystem. And I think that's what makes Amphanol   very very unique here. All right, so a unique  first company, not a stock figure we've ever had   on the show before. So really good to hear new  names that are doing so well uh and seeing some   really strong earnings right now. Let's get to the  second company on your list of optics companies   here watching. Yeah. So the the next one is a a  name that you know a lot of us have probably heard   of and this is Corning. The ticker is GLW. And  they really are just fiber cables. I mean it is as   simple as that and they are really at the center  of the manufacturing of the next generation of   optic cables. So they're really your global leader  foundational technology data transmission. What is   really interesting about this company is they  have really uh linked some massive hyperscaler   deals. So just recently they had a deal with  Nvidia and this is a US manufacturing optical   connectivity for AI infrastructure and basically  Corning is going to increase their USbased optical   connectivity 10x and US fiber capacity by more  than 50%. Okay, so that was one deal. Then I   believe it was last week they announced a  deal with Amazon. This is a multi-billion   dollar deal for US fiber manufacturing as well.  So this is a huge name. They're linking a lot of   these big companies that are not stopping the data  center buildout at all. Right? And you're talking   about cables that span oceans. Okay. So this is a  massive monumental buildout that is happening and   this company is just right at the center of this  whole revolution. Yeah, you can absolutely see   that in the price action on this stock. You look  at the chart and it's had a tremendous year. So   going back to that that main question that a lot  of our viewers have when they look at these stocks   is it's run up so much already. This is a name  like you said many people are familiar with. But   let's look at your your time horizon and growth  predictions on where this company could go. Those   deals that you just said are a good indicator that  that growth story may not be over yet. Yeah. So   this is really a 2028 story. So they recently were  at a JP Morgan conference and they highlighted   that their sales run rate is projected to reach  20 billion by the end of this year, 30 billion   by 2028. Then they even ventured to say that 40  billion by 2030. So you got to see the longer term   uh horizon here. Also for this year EPS is slated  to be $3.19. It's going to bump up to $421 and   then it's going to accelerate to 575 in 2028. So,  I think this whole refresh, this revamp, it's got   a lot of excitement. That's why you're seeing the  stock start to perform. But what I think is these   numbers can be revised higher because if they can  link deals with Nvidia, they can link deals with   Amazon, there's going to be more hyperscalers that  are going to want to work with Corning. Yeah, that   growth projection is really interesting to see how  much demand they're expecting. I think the next   question is can they keep up with that demand?  How's production going? How's that that backlog   of theirs going to do with all this demand coming  in? Well, I think that's why they're partnering so   that they can build out further capacity. I think  that was the key takeaway whenever they launched   this huge deal with Nvidia. Uh because there just  isn't enough components out there. So, we have to   build that capacity. So they're taking funds from  Nvidia to to kick everything off and then they're   going to be bringing more and more manufacturing  through the US. So this is a big construction   story that is multi-year in the making. Yeah,  that's the thing with these AI infrastructure   stocks is it's not just a one-time deal that the  deal is signed and that's the the only contract   they have coming in. That buildout takes so long.  So the story and growth story is also longer for   a lot of these names even though they've already  seen some some really good performance so far.   I want to talk about what you mentioned with the  the last stock and that's analysts catching up   to the kind of growth that they're seeing. You  look at this one, it's already soaring above   that consensus price target. We are starting to  see some higher price revisions. But what do you   think about where the analyst community sets on  their their price targets for a stock like this   versus what we're seeing in the orders and the  backlog and the demand for what they're offering?   I think as more and more of the analysts start to  learn about these companies, right? They start to   speak to these companies, I think they're going  to come to the realization that their numbers are   too low. Instead of just looking at analyst price  targets, I look at what they're saying in terms   of the the EPS. And every time they launch any  of these deals, right, whether it's with Nvidia,   whether it's with Amazon, you see that a group  of analysts just revise their earnings up. So,   if you can imagine, it just continues to go up and  to the right. Um, and I look at these numbers on   a weekly basis, and you know, I'm plotting them in  in my models, but it is just clear as day that the   analysts are always playing catch-up with a lot of  these leaders. And so, I think their price targets   are going to continue to just go up and up. You've  been hearing lately how people are starting to,   you know, all of the sudden raise micron numbers,  right? They literally sat on it for all of a year   and then it goes for like a thousand points higher  where they come out and they they raise. Um,   so I think you're going to start to see that in  the optical space as well. That's such a great   comparison of the analyst community catching up on  Micron and we heard from so many viewers who said,   "Well, Micron's already run its course. It's  already gone up too high. We don't want to   get in now." And then we continue to see that  raise that you were talking about. So relying   on what the analysts are saying, they're also  just trying to figure out exactly what these   companies are valued at because this AI buildout  story is so unique and it's happening so rapidly.   So I think that's a great point. I think it's  also important to point out on your newsletter   you were recommending MU how long ago? This was  last year. So we were very fortunate to to be way   ahead of analysts and really Wall Street on that  trade. Yeah, that's exactly what you cover in your   newsletter. So again, if you want to take a look  at Lucas's newsletter where he is focused in on   getting ahead of that AI story and sharing it with  his subscribers, you can check out this special   offer by scanning the QR code or going to the  link in the description for again a special rate   at joining the investment report for Tradesmith.  It's a great way to get ahead of some of these   names and the growth story that is still very much  unfolding. Lucas, let's get to that last name in   the optics story that you are following today.  Yeah. So, the last name is going to be Sienna,   and this is ticker CN. And I like to think  of them in terms of a traffic cop, right? So,   they're routing the light speeded signals to all  of the destinations, right? So, it's got to make   sure it gets to where it needs to go. They've got  deals with hyperscalers. Um, and you just have   to think of the scale that's across all the the  optical network and think of it as a distributed,   you know, AI system, right? There's all these  clusters and all these different locations.   And so Sienna really specializes in making sure  that everything gets to where it needs to go. And   you know what, they also have some software. They  have automation tools. Um, but this is a critical   component player to hyperscalers. It's all about  bandwidth and just really moving all of that data,   getting it to where it needs to go. This is a name  we've had on the show before. I've heard this one   before, but I think for me, this this sector is so  new, it's hard to differentiate what areas these   three different companies fill. So can you share  a little bit more about how Sienna is providing   a different product than the other two names  we just shared? Sure. So just think in terms   of systems traffic direction. It's really more of  an intelligent networking systems where they're   routing light. They're optimizing bandwidth and  they're also reducing congestion that can happen   with all of these different interconnects. They're  really key of making sure that all of the data   that is being transmitted that it gets exactly  where it needs to go. And listen, sometimes you've   got thousands and thousands of different packets  of data that are communicating all over the place.   Sienna is going to make sure that all of that  gets to where it needs to go. Yes, you can have   the best memory chips out there. You can have the  the best compute space, but unless it has the good   connection, we know this in cameras. if we don't  have a good cord connecting our camera to our   system, uh, nothing works. So, that connector is  just as important and such a a critical component   of the whole data center AI story. So, this is  a a great company to look at, but the chart on   this one is a little bit different than the other  two that we just covered. Zanna is in a little bit   of a pullback right now. It's had a tremendous  runup, still up nearly 500% for the year. So,   was it just naturally time for that pullback  because of the the amazing run this stock has had?   What's your thought on what is happening with this  stock chart today? Sure. I think you know as as we   are in the the heat of summer, we've got a lot  of rebalancing that's happening this week. You   got the Russell reconstitution. Even next week,  you got a big quarter end rebalance. I mean,   we're talking serious money is just being  mechanically moved around and so different   stocks are getting moved all over the place.  They're getting moved up, they're getting   moved down. This is a wonderful name and I  think this is a great buying opportunity on   a pullback. I think this is a long run story.  The reason for that if you go back to their   earnings they blew away EPS $164 this is versus  estimates of 146 revenues were up and away also   for their fullear guide they took that up to 6.3  billion well above the estimates of 6.15 billion   they noted margin expansion all right these are  the things that you want to hear also for full   year 2026 estimates are for EPS to come in right  around $653 it's going going to go up to $965 next   year and then it's going to balloon to $1428. One  thing I like to focus on is where is the earnings,   right? Because if earnings continue to go up and  they are every time you run the numbers eventually   the stock is going to follow those earnings. I  mean that's why we invest in the first place,   right? To get a share of future earnings. I think  this one is in the penalty box and it's a great   entry for a very big long-term story. Yeah, I  think it's so key for investors to to focus on   those earnings and to focus on the fundamentals  of how much money is this company bringing in and   what are they expected to continue bringing in in  the future. But right now, especially this week,   it feels like there's so much market sentiment  tied to the entire AI growth story. And so would   love to hear your thoughts for this name as well  as the other names we covered in this video. just   talking about how to navigate the different fears  and the headlines that can come about when we see   these random pullbacks in the entire big tech  market when we start to see renewed fears of   an AI bubble. Uh this has been the ongoing eb  and flow story uh in AI stocks for really the   last two years almost especially the last year.  What do you do with those kinds of moments in   the market? Yeah. No, that's a great question. I  mean one thing that we specialize at tradesmith   investment report is we also are looking at at  money flows and so that's where I spent a lot   of my career on institutional trading desk trying  to understand like is this a real pullback or is   it more of a rotational pullback one thing that  I found that was very interesting over the past   couple of years is a lot of stocks used to move in  these sectors right so you'd get long tech you get   long you know this other area but then we started  to notice that markets moving more thematically,   right? And so you started to see these baskets  start to uh really shape up together. So maybe   memory and storage started to move, maybe optical.  And I think as long as you're kind of following   the money and you're realizing that there's just  rotations that are happening as these stocks are   pulling back, it leads us to believe that this  isn't, you know, market uh money coming out of   the market. It's just people just doing rotations  for all different types of of reasons. And it all   comes back to a couple of things. One is earnings  continue to get revised higher. And it's not day   after day. It has been month after month nonstop.  And even still, if you just listen to earnings,   we're about to be at earnings season in the  next couple of weeks. Just like people were   wrong about Micron, you know, the last three,  four quarters in a row. they're probably going   to be wrong on a lot of these companies. And so I  think people should step back. There's going to be   some volatility in the summer. There's going to  be some volatility um all the time. But I think   if you are looking for highquality companies,  right, where they've got great management,   they have these long-term deals, you got to think  big, massive themes. Then these are the companies   that you're going to want to be focused on. And  last, I would say is as long as the earnings,   right? As long as analysts continue to take those  numbers up, chances are the stock is going to be   rerated higher after the shallow correction  happens. Such good information for investors   today. Lucas, thank you so much for your time.  It was so great to have you on the show. Again,   if you want to learn more about the AI bottleneck  story and where so much of this money is flowing   for the buildout of the entire AI infrastructure,  make sure to watch this video with Cube Kaplan we   had on last month. It has so much good information  about the AI story and some specific stocks   that are very interesting in the AI buildout  story, too. You can watch that full interview