Nvidia (NVDA) stock rose about 3% on Monday after the semiconductor giant announced investments in Coherent (COHR) and Lumentum (LITE) to advance optical networking. The chip giant believes that optical networking will be critical for the next phase of AI infrastructure, given that it can offer ultrahigh-bandwidth, energy-efficient connectivity across AI factories. Following these deals, Baird analyst Tristan Gerra reiterated a Buy rating on Nvidia stock with a price target of $300. Let’s look at the analyst’s views on these deals.
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Gerra noted that, as optical technology increasingly becomes vital for AI infrastructure deployments and is well-positioned to replace copper at 400G/lane speeds, companies are expanding their IP portfolios and integrating optical capabilities into their vertical models. The shift toward optical tech is also increasing due to the tightening supply of pluggable transceivers.
The 5-star analyst thinks that Nvidia’s investments in Coherent and Lumentum will support capacity expansion while securing supply to the semiconductor company. This, Gerra believes, supports the view that Co-Packaged Optics (CPOs), pushed by Nvidia for very high-end segments and expected to ramp significantly in 2027, will not replace pluggable transceivers anytime soon.
Gerra highlighted recent deals in high-speed connectivity for AI, including Qualcomm’s (QCOM) Alphawave acquisition and Credo’s (CRDO) Hyperlume acquisition. However, the analyst thinks that intertwined investments in the AI ecosystem to lock capacity or enable deployments could heighten systemic risks in a potential downturn in the times ahead.
Gerra ranks No. 305 among more than 12,100 analysts tracked by TipRanks. He has a success rate of 55% with an average return per rating of 20.5% over a one-year period.
Is NVDA a Good Stock to Buy?
Given the solid demand for Nvidia’s GPUs and solid execution, Wall Street has a Strong Buy consensus rating on NVDA stock based on 38 Buys, one Hold, and one Sell recommendation. The average NVDA stock price target of $271.11 indicates 49% upside potential.
