This year’s rapid rise in the electronics and photonics market shows every sign of accelerating. According to a Research and Markets study, the market will grow from $772.4 billion in 2025 to $839.4 billion in 2026, at a compound annual growth rate of 8.7%.
The report points to sustained growth in semiconductor manufacturing capabilities, burgeoning demand for high-speed data transmission, rapid alignment with fiber-optic communication networks, expansion of the consumer electronics industry and increased use of industrial automation systems. “The growth in the forecast period can be attributed to surging demand for AI-driven optical computing systems, expansion of 5G and next-generation communication networks, increasing adoption of autonomous and sensor-based systems, rising need for energy-efficient photonic devices, and growth of data centers and high-bandwidth infrastructure,” the report notes.
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Various channels are emerging in the photonics sector that should also add to industry growth, “including photonic integrated circuit miniaturization, high-speed optical communication systems, silicon photonics integration in computing systems, advanced laser-based sensing and imaging technologies, (and) energy-efficient optoelectronic device innovation,” the study says.
Big photonics industry names are getting their due, with Lumentum Holdings Inc. (ticker: LITE) and Coherent Corp. (COHR) both joining the S&P 500 back in March. In May, the laser and photonics sector saw the launch of the biggest pure-play sector exchange-traded fund, the Corgi Lithography & Semiconductor Photonics ETF (EUV), which holds $261.7 million in assets. The actively managed ETF tracks the full photonics value chain, including lasers, optical transceivers and silicon photonics.
The ETF is expected to have company. Three more photonics ETFs are set to come out in the next two months, giving sector investors more choices. Industry analysts say that the most significant share-price growth catalyst has been artificial intelligence data center expansion. “Hyperscalers and AI-system vendors require more optical links per unit of compute because copper interconnects face difficult power, distance and bandwidth limits as clusters scale,” said Tornike Laghidze, a portfolio investment analyst with BBAE, in a recent research note. “This created a direct and immediate revenue opportunity for companies across the photonics supply chain, and the market re-rated them accordingly.”
Which laser photonics technology stocks are looking like the best investments in 2026? These five stocks could be on any technology investor’s list of favorites:
| Photonics Stock | Year-to-date return* |
| Lumentum Holdings Inc. (LITE) | 142.5% |
| Coherent Corp. (COHR) | 130.5% |
| IPG Photonics Corp. (IPGP) | 64.8% |
| nLight Inc. (LASR) | 73.8% |
| Applied Optoelectronics Inc. (AAOI) | 391.2% |
*As of the June 22 market close.
Lumentum Holdings Inc. (LITE)
Up 142.5% year to date, Lumentum is facing some moderate headwinds of late. Market watchers don’t seem too vexed by the slowdown, though, as the company is a favorite in the burgeoning AI data center market.
Saiyi He, an analyst at CMB International Securities, has an initial “buy” call on LITE, with a $1,000 price target representing a 19.7% potential upside. He calls Lumentum a leading light in the AI “picks and shovels” channel, citing advanced indium phosphide (InP) lasers, optical circuit switches and external laser platforms that control and feed entire AI clusters, with profit margins expanding significantly this year and next.
Company decision-makers feel the same way. “As the speed and bandwidth inside data centers increase, so does the need for optical solutions,” said Michael Hurlston, president and CEO, upon news of LITE’s inclusion in the Nasdaq-100 (as of May 18). “We are just beginning to see the first use cases of co-packaged optics, optical circuit switches and 200G lasers.”
Hurlston also noted an “exceptional” Q3 financial performance, as net revenues rose 90% for the quarter. “While our topline growth continues to garner headlines, the more impressive part of our recent performance has been our margin expansion,” Hurlston said. “In fiscal Q3, gross margin improved by 540 basis points on quarter and operating margin by 700 basis points.”
Investors will need to grapple with a sky-high share price in the $880s, but if you can pony up the cash for even a few shares, it looks like green lights going forward for Lumentum, which is rising in a high-demand section of the technology industry.
Coherent Corp. (COHR)
Up 130.5% so far in 2026, this optoelectronic components and devices company is one of the most diversified players in photonics, spanning telecom, industrial lasers and semiconductor materials.
Major Wall Street banks are bullish on Coherent, with JPMorgan Chase and Goldman Sachs analysts firmly on board. The latter recently cited optical networking, where COHR specializes, as a powerful growth area in the AI infrastructure realm, adding that the overall addressable market for optical networking components should rise ninefold to $154 billion by 2028.
The company also has support from high places, recently announcing $50 million in funding from the U.S. Department of Commerce under the CHIPS and Science Act. The company plans to use the cash to expand its critical 6-inch InP semiconductor manufacturing facility in Sherman, Texas.
For COHR’s C-suite, the emphasis is on the rising demand for AI data centers, where leadership says the company is well positioned. “AI is transforming our world and driving a new era of American manufacturing, to build the infrastructure that will power the AI data centers of the future,” said Jim Anderson, CEO of Coherent, after the Commerce Department funding was announced. “Semiconductor photonic devices are essential building blocks of AI infrastructure, enabling the high-speed connectivity required to move unprecedented amounts of data between processors, memory and systems.”
Analysts do expect some price moderation on COHR shares, but the trend will likely be temporary after the stock’s massive run-up. Client agreements are inked into 2030, and the stock has a consensus $390 price target, indicating a 9.9% upside from current levels. JPMorgan analyst Samik Chatterjee stated in a mid-June research note that short-term share-price pressures were attributable to “limited summer catalysts” that are occurring alongside equally short-term co-packaged optics supply issues that are “likely overblown.”
[Read: 6 of the Best AI ETFs to Buy for 2026]
IPG Photonics Corp. (IPGP)
This high-performance fiber laser supernova’s stock price has risen 64.8% year to date but has struggled over the past three months, with the share price falling by over 6%.
What’s going on with IPGP? To start, there’s talk on Wall Street that IPG is overvalued right now. Over the same recent 90-day period, some IPGP insiders appear to agree to some extent, shedding $1.4 million in company stock, with no insider buying to balance things out. The company has traveled a rocky road after legal wrangling following a March 16 ruling in Düsseldorf, Germany, against IPG Photonics in an adjustable-mode beam laser patent infringement case brought by industrial products company Trumpf.
The good news? That case is now settled, and with over $800 million in cash, zero debt and two consecutive quarters of double-digit revenue growth, the company has emerged with a leading vision in fiber laser technology, which is widely used in the lucrative industrial manufacturing sector.
Trading around $118 per share, IPGP stock is backed by top analysts, including Thomas Hayes at Roth Capital Partners, who calls for 28% upside. Meanwhile, Jamie Wang at Citi isn’t far behind, sticking to a “buy” call on the stock with a 27.1% upside.
nLight Inc. (LASR)
This pure-play laser technology supernova’s stock price has risen 73.8% year to date, but it has slid 20% over the past 30 days. As with IPG Photonics, insider selling may have tipped the balance after the company’s CEO, Scott H. Keeney, sold 24,990 shares of common stock valued at $1.9 million in early June. Keeney shed those shares soon after LASR’s price hit an all-time high of $83 (it’s now trading at $65 per share). Yet Keeney’s SEC trade filing details show the trades were more of a tax-management issue than anything else, and the June trades represented only 1.1% of Keeney’s direct holdings in LASR stock.
Additionally, the company’s financial picture is in good order, with an expected 20% compound annual growth rate over the next two years, following 55% revenue growth in the first quarter of 2026 and major deals in the aerospace and defense sectors. For instance, nLight provides the laser technology for drone maker AeroVironment Inc.’s (AVAV) Locust laser system. It also has a deal with additive manufacturing (AM) technology company EOS to make nLight’s beam-shaping lasers available in EOS’ metal AM systems.
Meanwhile, second-quarter growth estimates are bullish, and analysts are on board, with a consensus $90 average price target, according to TipRanks, representing a 38% share-price growth rate.
Applied Optoelectronics Inc. (AAOI)
Up a staggering 391% so far in 2026, this Sugar Land, Texas-based semiconductor industry favorite is riding the AI-powered data center boost transceiver wave. Q1 GAAP revenue was $151.1 million, compared with $99.9 million in the first quarter of 2025, and the company’s Q2 business outlook calls for revenues to ring in at the $180 million to $198 million range.
“We continue to see strong customer engagement around our 800G transceivers and 1.6 Tb products, particularly as AI-driven datacenter investments accelerate,” said Thompson Lin, CEO at Applied Optoelectronics, in a statement. “Notably, we completed our first volume shipment of our 800G products to one of our large hyperscale customers in Q1.”
Looking ahead, Lin said the company continues to anticipate a strong volume ramp of its 800G products starting in Q2 and anticipates sequential revenue growth throughout this year, with significantly larger growth expected starting in Q3 as additional capacity comes online. “The fundamental drivers of long-term demand for our business remain robust, and we believe we are well positioned to become the premier high-volume U.S. producer of AI-focused data center transceivers and optics,” Lin says.
AAOI is also expanding its physical operations with the acquisition of a new facility in Pearland, Texas, in addition to its Sugar Land expansion, which should boost the company’s domestic manufacturing capacity for high-speed optical components. That news comes at a time when AAOI is racking up big contracts, having recently landed a new $71 million order for 800G single-mode data center transceivers from one of its major hyperscale customers. That deal marks $124 million in orders from the same as-yet-unnamed customer since mid-March, which will more than double the existing backlog, the company reports.
Wall Street analysts do expect AAOI’s share price to recede in the short term; most are sticking to a “buy” or “hold” position, however, with Rosenblatt Securities’ Michael Genovese calling for 28.5% upside in the stock over the next year.
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5 Best Photonics Stocks to Buy for 2026 originally appeared on usnews.com
Update 06/23/26: This story was published at an earlier date and has been updated with new information.
