While Nvidia (NASDAQ: NVDA) remains the dominant artificial intelligence company, its stock is significantly trailing Lumentum Holdings (NASDAQ: LITE), an optical components maker.
In this line, at press time, Lumentum shares were trading at $815.75, up 121% year-to-date, outpacing major AI players such as Nvidia.
Meanwhile, momentum for the American semiconductor giant has cooled in 2026 after years of explosive rallies.
At the close of Tuesday’s session, NVDA shares were valued at $178, down 4.5%. However, in pre-market trading on Wednesday, Nvidia is showing strength, rallying 3.7% to $184.
For investors, Lumentum, which supplies lasers, transceivers, and photonics for AI data centers, has turned a $1,000 investment on January 1 into $2,110, while Nvidia has turned the same amount into $953.
Why LITE stock is rallying
Lumentum’s surge is underpinned by strong fundamentals, led by positive investor reaction to a $2 billion strategic investment from Nvidia in early March 2026. The deal includes committed purchases of ultra-high-power lasers and capacity rights for next-generation optical interconnects.
The agreement will fund Lumentum’s new manufacturing facility in Greensboro, North Carolina, and secure supply for Nvidia’s Blackwell-based AI clusters.
Momentum has also been driven by solid financials after Lumentum’s fiscal second-quarter 2026 revenue reached $665.5 million, up 65.5% year-over-year, alongside raised long-term guidance to a $2 billion quarterly run rate, supported by sold-out 1.6T DR4 OSFP transceiver orders through 2027.
Optical circuit switching and co-packaged optics are also contributing a growing share of revenue as hyperscalers expand AI clusters.
Further support came from Lumentum’s inclusion in the S&P 500 on March 23, which triggered index fund buying and boosted trading volumes by over 40%, a move typically seen as a bullish catalyst due to increased capital exposure.
Lumentum’s rally also reflects a broader sector trend where optical component stocks have surged in 2026 as bandwidth becomes the key constraint in scaling AI data centers beyond copper’s limits.
As clusters grow to hundreds of thousands of GPUs, hyperscalers increasingly rely on ultra-fast, low-power optical connections to move data efficiently.
NVDA stock struggles
Nvidia, meanwhile, has faced recurring sell-the-news pressure contributing to the stock’s volatility in 2026.
Despite reporting fiscal 2026 revenue of $216 billion, up 65%, the NVDA shares dropped as much as 5.5% in a single session in late February as investors focused on risks over results.
At the same time, Hyperscalers’ AI capital expenditure is expected to exceed $600 billion this year, but concerns remain about returns and the potential impact of in-house chips from Microsoft, Amazon, and Google on future GPU demand.
Despite Lumentum’s outperformance, Nvidia maintains clear leadership in AI training and inference. Its GPUs, CUDA software stack, and DGX systems power core compute workloads.
