Wall Street analyst Alex Henderson of Needham offered the latest showcase of institutional bullishness on artificial intelligence (AI) when he upgraded his 12-month price target for Lumentum Holdings (NASDAQ: LITE) on March 4.
Specifically, Henderson revised the previous LITE stock forecast from $550 to $850. The change indicates that Needham no longer anticipates that Lumentum Holdings shares will drop 23.77% by early 2027 and that they will, instead, rally 17.81%.
The change is directly tied to the $2 billion investment agreement with the semiconductor giant Nvidia (NASDAQ: NVDA) that was unveiled earlier in March. Alex Henderson also backed the upgrade by citing both the scope of the deal and its relatively long-term nature.
Indeed, the blue-chip chipmaker is expected to start receiving Lumentum’s high-power lasers in the second half of the calendar year 2027, with the agreement remaining in place at least until 2029.
Considering Nvidia’s position in the semiconductor industry, the agreement could serve as something of a harbinger for the laser-maker’s customers to come in the coming years, thus further bolstering the bull case.
Wall Street is at odds with the wider market over AI boom and AI bubble
Elsewhere, Needham’s revision showcases a growing disconnect between Wall Street’s certainty and the broader market’s doubts. While LITE stock rallied significantly when the deal was announced, the March 3 session witnessed a large pullback that was, yet again, partially reversed in a March 4 pre-market rally.
Specifically, the company’s equity first rallied from the Friday closing price of $700 to the Monday’s close at $784, then reversed to $694 on Tuesday and, finally, arrived at its Wednesday press time price of $721.
The violent volatility is consistent with a wider anxiety about the high valuation – and the high hopes for AI – that has been evident since 2026 started, but also, arguably, since Nvidia briefly crossed a $5 trillion market cap.
By press time on March 4, the most dramatic examples of investor anxiety came in the wake of Microsoft’s (NASDAQ: MSFT) and Nvidia’s latest earnings reports, since both filings showed very strong business results and, nonetheless, led to single-session wipes valued in the hundreds of billions.
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