Citi Analysts Like This 1 ‘Picks-and-Shovels’ AI Stock. Should You Buy It Here?

Citi analysts have upgraded Lumentum Holdings (LITE), a prominent supplier of optical and photonic components critical to AI networks and data centers, to a “Buy” rating with a significantly increased price target of $800, up from $560. This reflects robust Wall Street confidence in Lumentum as a multibagger stock benefiting from the ongoing AI-driven surge in cloud infrastructure demand. Lumentum designs and manufactures optical products that enable high-speed data transmission in AI and telecom networks, making it a key “picks-and-shovels” play in the AI hardware ecosystem.

The company’s latest quarterly results underscored its strong growth trajectory, with record net revenue of $665.5 million, marking a 65% year-over-year increase and 25% sequential growth. Looking ahead, Lumentum projects revenue in the range of $780 million to $830 million for the next quarter, with solid operating margin and earnings expectations. Citi analyst Papa Sylla, who maintains a perfect track record over the past year, highlights Lumentum’s potential for continued upside, driven by accelerating investments in AI infrastructure and data centers.

This upgrade aligns with the broader industry trend where optical components and networking equipment suppliers are capitalizing on surging AI workloads that require expanded and faster data transfer capabilities. Lumentum’s positioning in this critical supply chain segment supports its potential as a strategic long-term investment amid the AI market expansion.