AI has been driving the markets for the past two years, proving that the technology truly is a game changer – and for multiple games. AI has impacted cloud computing, networking services, content and graphic design – the list seems limitless.
While this is undoubtedly good for the economy, and it’s helped boost the stock market to record levels, it’s also driving gains for individual companies and their investors, even beyond the expected horizon of AI stocks.
Looking at the tech sector and its relation to AI, Citi’s Atif Malik, an analyst ranked in 7th spot amongst the thousands of Wall Street stock pros, highlights networking equipment as a segment that will keep on thriving over the coming year – and he bases his stance in part on the impact of AI.
“After strong outperformance by the networking equipment group, investors are looking for next areas of AI dislocations in networking. Following ‘stage 1’ of Ethernet networking, we move to ‘stage 2’ and ‘stage3’ where the acceleration of ASIC solutions drive the need for AI Infrastructure intra and inter server networking and data center interconnects (DCI),” Malik explained.
Malik isn’t just offering broad commentary — he has singled out two AI infrastructure framework stocks for closer attention, naming both as “top picks” for 2025. To gauge the broader sentiment, we ran both names through the TipRanks database to see how the rest of Wall Street views their prospects. Here are the details.
Coherent Corporation(COHR)
The first stock we’ll look at is Pennsylvania-based Coherent, a company with a solid reputation in several high technology fields. Coherent got its start in the semiconductor industry, as a maker of high-end optics and materials used in chip production, and later added a wide range of industrial-grade optoelectronic components, optical and laser subsystems for communications and industrial uses, and high-tech instrumentation. The company operates in all aspects of these fields, including research and development, manufacturing, sales and marketing, distribution, and service and support.
Coherent’s products, especially lasers, optoelectronics, and optical systems, are frequently used in a variety of high-tech sensor systems – they are found in visual scanners, in touch screens, in automotive LiDAR units, to name just a few. Sensors make much of modern automation possible, and that links them directly to AI technology. Cutting edge AI systems, designed to pull the strongest possible results from automation, is made possible by high-tech sensors – and is required to parse the data pulled in by the myriads of sensor tech systems in our digital world.
But perhaps the most important single factor to look at for Coherent right now is the company’s line of optical circuit switches, an essential technology in AI data centers. The boom in AI has sparked a huge expansion in data centers – and that in turn has caused a spike in demand for the peripheral technologies that data centers depend on. It’s no coincidence that Coherent’s stock is up 145% for 2024 year-to-date, or that the company has seen a steady upward trend in revenues and earnings in recent quarters.
In the company’s last quarterly report, covering fiscal 1Q25 (September quarter), Coherent reported a total of $1.35 billion at the top line. This revenue figure was 28.6% year-over-year, and beat the forecast by $30 million. The company’s non-GAAP EPS, at 74 cents per share, was up from just 16 cents in fiscal 1Q24 and came in 13 cents per share above expectations.
Citi’s Malik has noticed Coherent’s strong growth trend of the past year, and has extrapolated it forward, writing, “As model sizes grow and require more scaled up computing, we see the optical space to directly benefit from the increased density, latency, and complexity of AI infrastructures. We estimate that COHR with its wide AI optics platform going from lasers (VCSEL, EML and CW) to transceivers is well positioned to be a key AI winner going into C2025E… We are modeling AI sales to reach ~$1.7B in FY2025, +180% vs. FY2024 and continue to view COHR’s strong AI sales as not only a key total sales driver but also a key factor to the company’s multiple expansion.”
Malik goes on to outline why this stock is likely to continue on its upward path: “We believe Street is still underestimating COHR AI sales and its new management’s ability to quickly deliver on its goals to 1) further focusing on the strong growth/profitable businesses, 2) implementing a firm-wide new pricing/cost optimization strategy, 3) improving COHR’s operational efficiency.”
The 5-star analyst goes on to put a Buy rating on the stock, backed up by a Street-high $136 price target that points toward a one-year gain of 27.5%. (To watch Malik’s track record, click here)
Malik is confident here, but so are most of his colleagues; the stock’s Strong Buy consensus rating is based on 13 recent reviews, including 11 Buys and 2 Holds. COHR shares are trading for $106.64 with an average price target of $116.23 suggesting an upside of 9% on the one-year horizon. (See COHR stock forecast)
Ciena(CIEN)
The next Citi pick we’ll look at is Ciena, a leader in the field of optical and routing systems, automation software, and associated services. Ciena’s product lines include software-defined platforms for optical networking; programmable, scalable, SDN-ready platforms for routing and switching; software systems to control automation and analytics for the management of network infrastructure and services; and intelligent automation software purpose-built to put AI to work in network management.
Ciena backs up its products with a full range of support services. These include network building, operational management and support, network improvements and enhancements, and a variety of solutions for bringing services to market.
This company is deeply tied to network systems, which in turn is tied to intelligent automation and AI. Ciena solutions fit into that, letting customers optimize their operations, support monetization strategies, and scale network architectures – all in tandem with near-exponential AI-powered gains in traffic. More than that, the company’s products are connected to DCI, optical data center interconnect services, and Ciena stands ready to provide a raft of benefits – in efficiency and scalability – to its customers through its DCI services.
Turning to results, Ciena beat top-line expectations in its recently released fiscal 4Q24 print; total revenue reached $1.12 billion, roughly flat YoY but $20 million over the estimates. However, the company’s bottom line came in as a non-GAAP EPS of 54 cents, 11 cents below the forecast. That appeared to matter little to investors, who sent shares higher in the aftermath of the report’s release.
Citi’s Malik also takes a positive stance. Assessing Ciena’s prospects, he expects the company to make the most of a rebounding market and the AI trend in 2025. He writes of this tech firm, “Ciena has a well-established leadership position in the DCI application of the optical transport market, and while the overall optical transport market remains weak, with sales down high teens YTD, due to inventory digestion, macro concerns, and weakness in China, the market is expected to return to growth in 2025. In addition, we believe Ciena will benefit from a growing AI-related DCI opportunity with ZR/ZR+ optical products that are not included in optical transport market data. Our recently raised FY26 estimates reflect the stronger adoption of pluggables in and around the data center, an opportunity not captured in the company’s 6-8% growth target.”
Along with a Buy rating, Malik sets a $98 price target that implies a 9% upside for the coming year.
Ciena claims a Moderate Buy consensus rating from the Street, based on 13 reviews that break down to 8 Buys and 5 Holds. However, the shares are priced at $89.72 and their $89.46 average price target reflects the stock’s 99%-plus year-to-date surge, suggesting it is currently fully valued. (See CIEN stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
