The optics industry witnessed heavy selling, which led to a significant decline in the stock prices of Applied Optoelectronics Inc. (NASDAQ: AAOI). The same trend was seen in shares of Coherent (XNYS: COHR), Lumentum (NASDAQ: LITE), and Sivers Semiconductors (STO: SIVE).
This proves that there is a notable distinction within the AI industry between stocks that trade due to momentum and other stocks that are affected by physical supply chain issues. According to AI stock analyst Serenity, there is no reason to panic regarding the decline in AAOI and SIVE shares. This means that one should enter the market and not exit it.
Based on a Motley Fool analysis cited by AOL, the decline in stock prices in the industry can be attributed to a decline in the semiconductor market in Korea and not necessarily to any problem in the companies themselves. The VanEck Semiconductor ETF lost 7% while NVIDIA lost 4% on that very day. The CBOE Volatility Index rose 12.8%, indicating a turnaround in the industry but no actual crisis. The biggest losers were AAOI (-13.9%), COHR (-10.4%), SIVE (-8.7%), and LITE (-7.4%).
A paradoxical view of serenity
In light of the decline in the optical sector shares, A X user I asked Serenity if she had lost faith in photonics. Serenity’s answer was clear and direct: “I’m actually more optimistic with lower prices.”
According to Serenity, SIVE has a market capitalization of US$1.9 billion and will be well positioned in the silicon photonics supply chain. Based on its post on Furthermore, Serenity went on to say that SIVE will be proven time and again as an essential partner in building optical networking solutions for hyperscale. SIVE is currently used by many suppliers due to the problem of continuous wave laser source supply.
Oh, I think you misunderstood… I’m actually more optimistic than ever with lower prices. $ sword At approximately $1.9 billion, you have:
– $GFS Reference laser
– Laser caliber and others $ ran out NVLink ecosystem to scale CPO
– $Poet And others to expand the scope of CPO
– $gbl And others for 1.6T+… https://t.co/pLs3LlVC2q– Serenity (@aleabitoreddit) June 25, 2026
BlockBets She expanded Serenity’s thesis by suggesting that recent negative articles about SIVE in Sweden, including a 15% increase in shares, would be attributable to the merger approval process and Nasdaq’s mechanism for listing companies rather than any decline in financial performance. In addition, Serenity claimed that the company’s $140 million in convertible securities are insignificant to most U.S. institutional investors because SIVE’s gross profit margin is approximately 60%.
With AAOI, Serenity highlighted that management plans to generate monthly revenue of approximately $471 million during the second half of 2027 and has raised approximately $1.4 billion through a market offering of shares to provide working capital to support further equity growth. Serenity then compared AAOI to Nebius, which was valued at around US$70 before its operating metrics were able to support its valuation and subsequently traded at over US$250.
A real-life example of segmented pricing
The sell-off in the photonics sector came after a recent stress test that pointed to selective outflow of capital into AI trading.
On June 4, Broadcom released its earnings report and delivered strong results for the quarter, such as $22.2 billion in revenue and 143% year-over-year growth in AI semiconductor revenue. However, its future guidance has not lived up to growing expectations. As a result, Broadcom’s stock price fell 12.6%, Micron lost 7%, and AMD lost more than 4% in pre-market trading.
The AAOI share price showed the opposite dynamics, rising by 11.8% and closing at the level of $202.89.
This dynamic is consistent with the recent trend previously observed in the Nikkei Asia report. AI trading is beginning to segment in terms of investors’ approach to companies, depending on whether they have demand and execution risk or supply risk. Bottlenecks-related devices, such as laser diodes, optical transceivers, and indium phosphide substrates, began to be traded based on available capabilities rather than emotions. Capital tends to shift towards suppliers where production limits, not order quantities, are the primary constraint.
There are still execution risks related to fundamentals
The case for buying either stock relies on large increases in production that have not yet occurred. AAOI’s revenue for the first quarter of 2026 was $151.1 million (up 51% from a year ago), but it posted a loss of $14.3 million and also missed consensus estimates, according to TechFlow.
The company is upgrading its manufacturing lines in Texas from 4-inch to 6-inch wafers, a move that will allow it to produce 3.5 times more laser diodes, according to Kucoin. Rosenblatt Securities increased its price target on AAOI to $220 and called it one of its top picks. On the other hand, B. Riley gave a neutral rating and pointed to possible delays in mass production of the 800G until the second half of 2026.
Currently, AAOI’s market capitalization is around $10 billion, and based on trailing earnings, it is not profitable. Cohesive trades at 189 times trailing earnings and Lumentum at 146 times trailing earnings, according to the AOL report, leaving little margin for error across the optics group if excessive capex sentiment changes.
For SIVE, the test is whether Nasdaq execution and partnership revenues from the CPO ecosystem turn into the kind of quarterly numbers that justify a $1.9 billion valuation for a company still in the early commercialization stage.
Investors keeping an eye on the solution can track two catalysts: AAOI’s 6-inch wafer production timeline in the second half of 2026 and SIVE’s progress in converting its CPO pipeline partnerships into reserved revenue.
