AI drives strong demand for CPO technology. Bank of America and Morgan Stanley raise target price for Lumentum (LITE.US).

Bank of America Corp reiterated its "neutral" rating on Lumentum Holdings (LITE.US) and raised its target price from $210 to $375. The bank stated that due to strong market demand for optical transceivers and optical components, it significantly raised its target price and noted that current supply in these areas still cannot meet demand. Additionally, Morgan Stanley also maintained a "neutral" rating on Lumentum Holdings and raised its target price from $190 to $304. The bank stated that the scope of artificial intelligence trades in 2025 has expanded beyond semiconductor stocks and will benefit infrastructure companies, especially companies in the optical communication market. Morgan Stanley expects this trend, particularly for optical communication companies, to continue into the first half of 2026. The explosion of AI computing power has created a strong demand for high-speed connectivity, and CPO (co-packaged optics) technology is a core solution to break through bandwidth and power consumption bottlenecks. Simply put, CPO integrates optical engines and chips (CPU/GPU/switch ASIC) together, allowing electrical signals to be converted into optical signals without the need for long-distance transmission, addressing the two main pain points of traditional optical modules: significantly reduced power consumption and increased bandwidth density.