Lumentum Holdings LITE and Applied Digital Corporation APLD are emerging beneficiaries of the accelerating AI infrastructure buildout. Lumentum supplies advanced optical networking components that enable high-speed data transmission within AI data centers. At the same time, Applied Digital develops and operates AI-focused data centers and high-performance computing infrastructure. Despite their different business models, both companies are benefiting from the same wave of AI-driven capital spending.
The AI infrastructure investment cycle is gaining momentum as hyperscalers, cloud providers and enterprises continue expanding their AI capabilities. According to Mordor Intelligence, the global AI infrastructure market is projected to reach $202.5 billion by 2031, growing at a 14.9% CAGR. As AI infrastructure spending accelerates, investors are increasingly evaluating companies across different layers of the AI ecosystem. Against this backdrop, comparing these two companies offers insight into which is better positioned to capitalize on this long-term opportunity.
The Case for LITE Stock
Lumentum is emerging as one of the strongest beneficiaries of the accelerating AI infrastructure buildout, supplying the optical engines that enable high-speed connectivity inside and between hyperscale AI data centers. Its portfolio spans electro-absorption modulated lasers (EMLs), continuous-wave lasers, pump lasers, narrow-linewidth laser assemblies, optical circuit switches (OCS) and cloud transceivers — all of which are essential for AI networking, data center interconnect (DCI) and co-packaged optics (CPO). The company increasingly positions itself as a critical supplier of both AI infrastructure components and complete optical systems.
AI demand continues to translate into exceptional execution. In third-quarter fiscal 2026, Components revenues climbed 77.3%, and Systems revenues jumped 121.1%, driven by record cloud transceiver shipments, robust EML demand and expanding AI deployments. Management expects fiscal fourth-quarter revenues of $960 million-$1.01 billion, reflecting confidence in sustained AI infrastructure investments and continued business momentum.
Lumentum's competitive advantage lies in its differentiated "scale-out" and "scale-across" optical portfolio. Hyperscalers are increasingly adopting distributed AI architectures that require high-bandwidth optical interconnects, pump lasers, wavelength-selective switches and narrow-linewidth lasers. The company stated several AI-focused components remain effectively sold out, while 1.6T transceivers, optical circuit switches and CPO products are expected to provide additional multi-year growth opportunities.
However, investors should remain aware of supply constraints, uncertain AI investment timing, manufacturing ramp execution, geopolitical trade restrictions and customer concentration, which could affect near-term performance. Even so, these risks appear manageable given the company's expanding capacity, improving profitability and strengthening product portfolio.
Analyst sentiment toward Lumentum has strengthened, with the Zacks Consensus Estimate for its fiscal first-quarter and full-year fiscal 2027 earnings pegged at $3.53 and $18.07 per share, indicating growth of 220.91% and 121.15%, respectively. These estimates have also moved higher over the past 30 and 60 days.
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The Case for APLD Stock
Applied Digital is positioning itself as an emerging beneficiary of the accelerating AI infrastructure buildout, but the investment case remains clouded by execution and financial risks. The company is pursuing an aggressive, capital-intensive expansion strategy that continues to pressure profitability while increasing financial leverage. Third-quarter fiscal 2026 net loss attributable to common stockholders widened to $100.9 million, while operating loss reached $85.7 million despite strong revenue growth. The balance sheet reflects the scale of its AI infrastructure buildout, with long-term debt exceeding $2.5 billion, making future returns heavily dependent on timely project execution, customer ramp-ups and continued access to financing.
Despite strong AI demand, Applied Digital faces significant execution challenges. Future growth depends on completing Polaris Forge and Delta Forge projects on schedule, securing additional financing, converting its power pipeline into contracted capacity and signing more long-term hyperscaler leases. The company also remains exposed to customer concentration, power availability, permitting delays, equipment disruptions and the timing of hyperscaler leasing decisions — all of which management identifies as key business risks. Moreover, management noted that only a small fraction of its long-term power pipeline has been contracted, while several development sites remain subject to customer negotiations, regulatory approvals and infrastructure development.
Still, Applied Digital is positioned to benefit from the accelerating AI infrastructure investment cycle. The company designs, builds and operates purpose-built AI factories for AI, cloud and high-performance computing workloads while leveraging a vertically integrated strategy spanning power, AI infrastructure and accelerated compute.
APLD recently laid the foundation stone for the 300 MW Delta Forge 1 AI campus, secured a $100 million development facility from Macquarie, strengthened the credit quality of CoreWeave leases, completed a $2.15 billion secured note offering and continued the expansion of Polaris Forge. Management also targets approximately 3 GW of AI capacity by 2031, positioning the company as a potential long-term beneficiary of hyperscalers' accelerating AI infrastructure spending.
The Zacks Consensus Estimate for APLD’s fiscal 2027 loss is currently pegged at $1 per share, wider than the 70-cent loss reported a year ago. While the estimate has remained unchanged over the past 30 days, it has worsened by 9 cents over the past 60 days.
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Price Performance & Valuation of LITE & APLD
In the past six months, shares of Lumentum have surged 130.9% against Applied Digital’s decline of 22.3%. Growing adoption of Lumentum's AI optical technologies has enhanced revenue visibility and investor sentiment, enabling the stock to outperform despite volatility across the broader AI infrastructure sector.
LITE Vs. TEAM: Six-Month Price Return Performance
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Valuation remains a consideration, with Lumentum and Applied Digital each carrying a Value Score of D and F, respectively. However, Lumentum trades at a lower forward 12-month P/S multiple of 10.21X versus Applied Digital's 11.79X.
LITE's relatively reasonable valuation, combined with its strong AI-driven growth prospects, makes the stock an attractive choice for investors seeking long-term upside with greater stability.
LITE vs. APLD: Forward 12-Month P/S Ratio
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LITE or APLD: Which Stock Has the Edge?
Lumentum appears better positioned than Applied Digital at present, supported by stronger execution, accelerating earnings growth, improving estimate revisions and a relatively more attractive valuation. While both companies stand to benefit from expanding AI infrastructure investments, Lumentum offers a more balanced risk-reward profile, making it the stronger choice for investors seeking long-term AI-driven growth with greater stability.
Currently, LITE has a Zacks Rank #2 (Buy), while APLD carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).