Morgan Stanley Warns Stretched Valuations May Temper Lumentum’s (LITE) 2026 AI Growth

Lumentum Holdings Inc. (NASDAQ:LITE) is 1 of the hottest large-cap stocks of 2025. On December 17, Morgan Stanley raised the firm’s terms people connected Lumentum to $304 from $190 with an Equal Weight standing connected the shares. After broadening from chips to infrastructure (especially optical) successful 2025, the AI concern inclination is expected to stay beardown done mid-2026. Despite this momentum, a year-ahead enactment cautions that full-year occurrence volition necessitate a much disciplined attack to banal picking, arsenic existent valuations person go stretched crossed the sector.

A time earlier this rating, Bank of America raised the firm’s terms people connected Lumentum to $375 from $210 with a Neutral standing connected the shares. The steadfast substantially accrued its terms targets for Lumentum owed to an exceptional surge successful request for optical components and transceivers. This accommodation reflects a marketplace situation wherever orders for these technologies proceed to outpace disposable supply.

Earlier connected December 5, arsenic well, JPMorgan expert Samik Chatterjee besides raised the firm’s terms people connected Lumentum to $350 from $235, portion keeping an Overweight standing connected the shares. The steadfast accrued its fiscal projections for optical networking companies, pointing to scale-across and multi-rail opportunities arsenic superior maturation drivers. This affirmative outlook is fueled by a larger TAM for scale-across technologies and a caller question of telecom innovation designed to enactment multi-rail infrastructure successful metro and long-haul networks.

JPMorgan believes that these factors volition prolong the existent precocious maturation rates implicit a much extended play than antecedently expected. Consequently, the steadfast has applied a higher net aggregate to these stocks to bespeak their improved semipermanent valuation potential.

Lumentum Holdings Inc. (NASDAQ:LITE) manufactures and sells optical and photonic products successful the Americas, the Asia-Pacific, Europe, the Middle East, and Africa. It operates done 2 segments: Cloud & Networking and Industrial Tech.

While we admit the imaginable of LITE arsenic an investment, we judge definite AI stocks connection greater upside imaginable and transportation little downside risk. If you’re looking for an highly undervalued AI banal that besides stands to payment importantly from Trump-era tariffs and the onshoring trend, spot our escaped study connected the best short-term AI stock.

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Disclosure: None. This nonfiction is primitively published at Insider Monkey.