Data centers have thousands of processors, but they’re not useful if there’s too much latency.
Replacing electricity with light for data transmission has been a big shift. And the companies doing it have grown, though they’re under pressure now.
Two Pressured Photonics Leaders
Photonics is the science of light, specifically generating, controlling, and transmitting it, often with lasers, optical fibers, and so on. And many facilities are being built with this cutting-edge technology in place.
The shift from electricity to light for data transmission has been a big boon for key suppliers.
Two photonics leaders are under selling pressure and have been flat or worse for months. But the share price direction doesn’t reflect the fact that this technology makes a meaningful difference and is being deployed at scale.
With markets under pressure, it’s natural that they’ll turn around at some point. When it happens, the leaders coming out of the pile will almost certainly be backed by institutional investors in big ways.
Why? Because they’re attracted to stellar fundamentals. When superior fundamentals and institutional buying combines, the sky is the limit.
One photonics leader that’s being sold right now is Corning (GLW). It’s a core optics name with a $135 billion market capitalization – like a highway for AI data transmission.
But it’s down 40% from highs. Given the huge fiber optics demand, the plummeting valuation is attractive. And when combined with future sales expectations of $11.1 billion and $14.6 billion for 2027 and 2028, respectively, it’s no wonder institutions have been buying shares over the last year:
Big Money began flowing into GLW shares earlier this year. The blue bars on the right highlight when GLW made the Outlier 20 list, meaning it’s an all-star. When the market rises again, this name could lead the way due to its massive backlog.
A second pressured optics stock is Marvell (MRVL), the $240 billion market cap company building semiconductors that convert electrical signals to optical signals for data transmission.
Data centers need this technology and shares are off 17% from highs. Also, the price-earnings ratio has fallen to around 44 times forward earnings.
Fundamentally, the company is rock-solid. Its per-share earnings are expected to grow 61% in a year, with sales expected to jump 51% in the same period. Data center sales alone are projected to grow from $9.8 billion next year to $15.7 billion in 2028 and $23.6 billion in 2029.
MRVL shares shot from about $92 up to $300, and institutions were behind the push:
You can see the power of outlier inflows. That rise occurred over roughly three months and Big Money generated nine outlier inflows in that time.
New Frontiers
Both GLW and MRVL are among some of the most-bought names over the past year or so. They’re included in the new MoneyFlows Frontiers – GLW for Photonics and MRVL for AI.
With both companies having a firm footing in the AI infrastructure build-out, it’s no surprise they’re drawing outlier inflows from institutions. The fact that it’s on pause right now is an opportunity before a potential next climb higher.
If you are a Registered Investment Advisor (RIA) or a serious investor, take your investing to the next level. MoneyFlows created 11 Frontiers indexes to help serious investors capture AI-driven themes and learn the leading stocks in each Frontier. Get started here.
Disclosure: at the time of publication, the author holds no positions in GLW or MRVL.
