Nvidia Stock (NVDA) Pops after $4B Bet to Strengthen Supply Chain with Coherent and Lumentum

Nvidia NVDA +3.01% ▲ is moving beyond just selling chips to strengthen its supply chain by investing $4 billion in photonics makers Coherent COHR +14.21% ▲ and Lumentum LITE +9.36% ▲ . Following the news, NVDA stock gained 3.4% in Monday’s trading session. Also, shares of Coherent and Lumentum rose over 14% and 10%, respectively.

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The move comes as AI infrastructure is starting to hit the limits of copper-based networking, and the company needs reliable access to optical components to keep its GPU-powered “AI factories” growing.

Importantly, optical links, which move data with light instead of copper, are becoming essential as AI systems scale to thousands of GPUs. Copper wiring hits physical limits at high speeds, while photonics delivers more bandwidth, lower power use, and better cooling efficiency.

The company says these optical technologies are key to the next generation of AI infrastructure.

**Nvidia’s Strategic Bet on Photonics **

Nvidia is investing $2 billion each into Coherent and Lumentum, both leaders in optical and photonic technologies. These deals include multibillion‑dollar purchase commitments and future capacity rights, giving Nvidia priority access to advanced laser and optical networking components.

Also, the investment will support research and development (R&D) and the expansion of U.S.-based manufacturing capabilities.

**Baird Sees This as a Validation of Nvidia’s Optical Strategy **

Following the announcement, Baird analyst Tristan Gerra reiterated a Buy rating and $300 price target on Nvidia stock, saying the investments strengthen its position as optical technology becomes central to AI infrastructure.

Gerra noted that Nvidia’s investments in Coherent and Lumentum help lock in the high-end optical components it needs, while also expanding future manufacturing capacity.

He added that recent deals, such as Qualcomm QCOM -1.01% ▼ buying Alphawave and Credo CRDO +1.19% ▲ acquiring Hyperlume, show a broader industry race to secure high-speed connectivity technology.

However, the five-star analyst warned that these intertwined investments across the AI ecosystem could increase systemic risk in a future downturn.

Is NVDA a Strong Buy?

Overall, Wall Street has a Strong Buy consensus rating on Nvidia stock based on 38 Buy, one Hold, and one Sell recommendations. The average NVDA stock price target of $271.11 indicates 48.34% upside potential.

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