$NVDA

Summary

The analyst is bullish on AAOI and NVDA due to strong revenue, architectural shifts, and supply constraints in the photonics sector, expecting fundamentals to improve over the next two years.

Reasoning

Photonics is backed by actual revenue and architectural shifts led by NVDA; AAOI is projecting $1.4B quarterly revenue by mid-2027 with scarce CW capacity; major players are sold out and fundamentals will catch up; TAM expected to grow significantly per GS reports.

Photonics is backed by actual revenue numbers and it's an architectural shift championed by $NVDA. Quantum barely has any revenue. $LITE is completely sold out for the next 2 years (per $POET AGM) likely starting into 2029. Lumentum is so strained that they buy CW lasers off competitors (earnings transcript) $COHR is bottlenecked, so they buy EML off Lumentum. Then, $AAOI is coming in with Made-in-America independent CW capacity, are projecting $1.4B/quarterly revenue ending H1 2027 of a stupid $9.3B MC today. So all the CW capacity from independent players who have it now like $AAOI or $SIVE are likely to become scarce resources. Many other hyperscalers have already started LTA discussions (per Trendforce). And players like $AMD are currently talking with players such as $AAOI (Rosenblatt channel checks). Thematically, next 2 years is 9x TAM to US$154B per GS reports, especially with 16x/45x dollar content increase in scale out/scale up. Then there's the overall thematic AI drop from $META, which is widely misunderstood because people conflate what "excess capacity" means. And as UBS mentioned, Meta planning a cloud offering is NOT NEW NEWS. Bloomberg just has a tendency to publish information that causes doom drops across the semi sector like Nvidia export controls a few months back. But I'm familiar with what I'm holding so I'm confident in these numbers playing out. Especially when all the major players are sold out, the fundamentals catch up eventually.

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