• In recent days, Nvidia has deepened its push into photonics for AI datacenters, committing billions of US dollars and forming an investment partnership with Coherent to expand high-speed optical connectivity capacity across its networking and GPU interconnect platforms.
• This partnership, alongside Coherent’s strong Data Center & Communications growth and long-term optical transceiver demand visibility, underscores the company’s emerging importance in easing AI infrastructure bottlenecks.
• We’ll now examine how Nvidia’s investment partnership and validation of Coherent’s AI datacenter optics influence the company’s existing investment narrative.

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Coherent Investment Narrative Recap

To own Coherent, you need to believe AI data centers and high speed cloud networks will keep demanding ever more advanced optics, and that Coherent can convert its technology lead and capacity investments into durable profits. Nvidia’s multi‑billion US dollar photonics push and US$2 billion partnership reinforce the near term AI optics demand story, but they also raise the stakes around Coherent’s biggest risk right now: heavy capital spending that could look stretched if orders cool.

The most relevant recent announcement here is Nvidia’s equity and investment partnership with Coherent, which comes alongside Coherent’s Q3 FY2026 report showing 21% year over year revenue growth and Data Center & Communications at 75% of revenue. This pairing highlights how tightly Coherent’s main catalyst higher speed datacenter optics is now linked to a small group of hyperscale customers whose capex decisions and architectural choices can swing utilization and margins.

Yet behind the optimism, investors should be aware that if hyperscaler buildouts slow while Coherent’s expanded fabs keep running at high fixed cost, the impact on earnings could...

Coherent's narrative projects $18.3 billion revenue and $2.3 billion earnings by 2029. This requires 40.4% yearly revenue growth and about a $1.9 billion earnings increase from $400.6 million today.

Uncover how Coherent's forecasts yield a $371.16 fair value, a 13% downside to its current price.

Exploring Other Perspectives

Against this, the most pessimistic analysts were assuming only about 11.6% annual revenue growth and roughly US$735.0 million of earnings by 2028, reminding you that views on Coherent’s AI optics capacity and demand can differ sharply and that this new Nvidia news could shift those expectations in very different directions.

Explore 5 other fair value estimates on Coherent - why the stock might be worth less than half the current price!

Form Your Own Verdict

Disagree with existing narratives? Extraordinary investment returns rarely come from following the herd, so go with your instincts.

• A great starting point for your Coherent research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.
• Our free Coherent research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Coherent's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.