Lumentum CEO: The company's optical components are sold out until 2029, with some products facing a demand gap of up to 70%.

Lumentum Holdings, an optical device manufacturer invested in by Nvidia, is facing a huge production capacity gap – its CEO said the company’s products are sold out until early 2029, and the strong demand for AI data centers is keeping it struggling to keep up.

In an interview with Bloomberg in Tokyo on Friday, Lumentum CEO Michael Hurlston revealed that some products will face a demand shortfall of about 70% by next year, while others will still have a 30% demand gap by 2028. Just six months ago, he stated that the company's production capacity was expected to be sold out by 2028 —a timeline that has now been brought forward by nearly a year. "We're completely sold out, and we see no end in sight," Hurlston told Bloomberg.

The tight supply situation directly impacts investment logic for related technology stocks and AI infrastructure. Analysts, on average, expect Lumentum's sales to more than double this year.

Capacity expansion cannot keep up with demand

To cope with out-of-control orders, Lumentum has increased the capacity of its key factory in the Tokyo metropolitan area to 12 times its original capacity over the past two years and plans to invest at least $350 million in the factory and adjacent facilities. The company has also completed the expansion of its factory in Caswell, UK.

However, building up production capacity for optical components is not something that can be done overnight. Hurlston points out that companies like Lumentum need three to five years to build new production capacity. To mitigate the risks of capital expenditure, hyperscale cloud providers have pledged support. "These hyperscale cloud vendors are willing to invest in this," he said.

Regarding product line expansion, Hurlston stated that the company may need to strengthen its existing capabilities through acquisitions. "I think in the next year or so, we hope to add new product capabilities to our existing foundation," he said.

The underlying logic of Nvidia's investment

Lumentum's core product is indium phosphide (IP) devices, a key material for enabling high-speed cloud computing and data transmission. Earlier this year, Nvidia invested $2 billion each in Lumentum and its competitor Coherent Corp., highlighting the strategic importance that leading AI chip manufacturers place on the optical interconnect supply chain.

Silicon photonics is considered a key direction for next-generation data center interconnects—using light instead of copper cables to transmit data, supporting higher transmission rates for AI hardware while reducing system heat dissipation and energy consumption. Lumentum acquired some related technologies through its 2018 acquisition of Oclaro Inc., which inherited Hitachi's accumulated optical research experience. Oclaro's plant in Sagamihara is now one of the world's most advanced indium phosphide device manufacturing bases.

Risk Warning and DisclaimerInvesting involves risk; please exercise caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Any investment decisions made based on this information are at your own risk.