Buy these stocks to ride the next big AI wave — connectivity, analyst says

Deutsche Bank analysts have placed Coherent and Lumentum at the top of their hardware picks for the artificial intelligence era, describing them as “highest conviction” names. The focus this time is not on chip designers but on the physical infrastructure that connects AI systems. As large-scale AI models process enormous volumes of data, the demand for high-speed optical connectivity within and between data centers becomes a critical bottleneck.

Both companies are major suppliers of optical components, lasers, and transceivers—the hardware that moves data quickly across networks. The thesis is straightforward: AI’s computational power is only useful if data can be transmitted efficiently. That makes these firms potential beneficiaries of data center buildouts, even if they are not at the center of the semiconductor spotlight.

For investors, this signals that the AI trade is broadening beyond traditional chipmakers into supporting hardware. Deutsche Bank’s “highest conviction” label suggests a strong preference relative to peers, but it remains one firm’s view. With expectations running high, the market will likely watch these companies’ earnings and guidance for evidence that connectivity demand is translating into actual orders.