This $700 AI Stock Could Be A $1,000 Play — And It's Not Nvidia

Everyone is chasing Nvidia Corp (NASDAQ:NVDA). But the next leg of the AI trade may not be about chips—it may be about what connects them. That's where Lumentum Holdings Inc. (NASDAQ:LITE) is starting to stand out. Trading around $700, the stock now has a $1,040 price target from BNP Paribas analyst Karl Ackerman, implying roughly 47% upside. And the call isn't based on hype—it's based on where AI infrastructure demand is actually going. The AI Trade Is Moving Beyond GPUs Lumentum sits in a less crowded—but increasingly critical—part of the stack: optical components. As AI models scale, data centers aren't just adding more GPUs—they're upgrading how those GPUs communicate. Ackerman sees that driving demand for: 800G and 1.6T optical transceivers 100G/200G EML lasers co-packaged optics (CPO) optical circuit switching (OCS) In other words, faster chips require faster data movement. And that's Lumentum's lane. Nvidia Is Already Pulling It Forward The demand isn't theoretical. Ackerman highlights that Lumentum is seeing rising volumes of ultra-high-powered lasers tied to Nvidia's next-gen AI infrastructure, including co-packaged optical switches. Even more telling: Nvidia has already committed multi-year capacity investments to secure supply. That's not experimentation—it's planning ahead. Lumentum’s Multi-Year Growth Setup The longer-term outlook is where the story gets more aggressive. Lumentum laid out a path to: ~$8 billion in annual revenue ~40% operating margins $30+ in annual EPS by 2028 And Ackerman believes there's upside even to those numbers, driven by new design wins, expanding EML capacity and a multi-billion-dollar optical switching opportunity The Bigger Picture The AI narrative is evolving. First it was chips. Then it was models. Now it's infrastructure. And while Nvidia may still be the face of the AI boom, companies like Lumentum are becoming the plumbing behind it. That's why this trade looks different. It's not about catching the first wave—it's about positioning for what comes next. Photo: Shutterstock