Mizuho raised the price target on Lumentum’s (LITE) stock to $325 from $290, noting that Google’s Tensor Processing Units, or TPUs, ramp-up is positive for Lumentum.
On Tuesday it was reported that Meta Platforms (META) is in talks to spend billions on the Alphabet (GOOGL) (GOOG) unit’s AI chips.
Analysts led by Vijay Rakesh said Google’s TPU potential traction at Anthropic (ANTHRO) and recent report on Meta and Amazon (AMZN) Amazon Web Services, or AWS, a positive for Broadcom (AVGO).
The analysts believe Meta’s current Al infrastructure is about 95% on graphics processing units, or GPUs, — Nvidia (NVDA) and AMD (AMD). The analysts estimate that Meta remains a large customer for Nvidia but potentially a bigger customer for AMD Instinct. A move to TPUs is positive for Broadcom (AVGO), and could be a modest challenge for GPU suppliers.
The analysts said they continue to like Nvidia as an over $500B Blackwell and Rubin pipeline remains intact with upside.
Rakesh and his team noted that key supply chain beneficiaries for TPU are Micron Technology (MU) in memory, and Lumentum in optical networking.
Near term, the analysts also see Micron’s earnings coming up with potential for significant upside (February quarter guidance with DRAM/NAND pricing tailwinds).
“We also see LITE as a key beneficiary of any TPU ramps with OCS still in early stages. AVGO remains our TOP PICK as we raise our LITE PT to $325 (prior $290) with GOOG TPU ramps positive for LITE’s OCS [Optical Compute Switch],” said Rakesh and his team.