The Best "Picks and Shovels" Artificial Intelligence (AI) Growth Stock on the Nasdaq Right Now

There's an infrastructure metaphor that never gets old in investing: During a gold rush, you don't need to find the gold to get rich. You just need to sell the picks and shovels. The artificial intelligence (AI) gold rush has one version of this that is even more literal than most investors realize, and it runs on light.

Lumentum Holdings (NASDAQ: LITE) makes components that convert electrical signals in AI data centers into optical signals, and right now, that capability may be more strategically important than ever. The stock has also been on a tear -- it's up nearly 420% over the last six months. I'm generally a skeptic of stocks everyone loves right now, but I don't think it's too late to buy into this one.

Image source: Getty Images.

What Lumentum does

Lumentum is a San Jose-based photonics company. It makes lasers, optical transceivers, and photonic components that sit inside data centers and enable high-speed, energy-efficient communication between chips, servers, and racks. In plain terms: When an AI cluster needs to move enormous volumes of data, it cannot rely on copper wire alone. At scale, copper runs hot, slows down transmission, and wastes power. Optical connections -- using light -- move data faster, over greater distances, with dramatically less energy lost as heat.

This is why hyperscalers are spending billions redesigning the internal architecture of AI data centers to use optical interconnects, and why Lumentum has become a company that the biggest names in AI cannot easily ignore.

Nvidia just wrote Lumentum a $2 billion check

In March, Nvidia (NASDAQ: NVDA) announced a multiyear strategic partnership with Lumentum, including a $2 billion investment to grow Lumentum's manufacturing capacity and deepen R&D collaboration in data center optics. The announcement said Nvidia and Lumentum would work together to accelerate innovation in advanced optics technologies to enable next-generation AI infrastructure.

The large majority of AI data centers being built are being built around Nvidia's products. So when Nvidia invests $2 billion in a photonics company and commits to a multiyear R&D relationship, it signals that optical connectivity is becoming a core constraint in the AI build-out and that Lumentum is the chipmaker's preferred partner to address it.

The OFC 2026 showcase

In the same month as the Nvidia deal, Lumentum went to the Optical Fiber Communication Conference 2026 in Los Angeles and demonstrated a suite of technologies that, to me, read like a roadmap for the next several years of AI data center design.

The centerpiece was a breakthrough optical scale-up demonstration using VCSEL (vertical-cavity surface-emitting laser) technology, demonstrating that its optical interconnects can support the massive parallelism required by next-generation AI clusters. Lumentum also showed its multirail coherent optical channel monitors that pack four times the density of typical market modules, and an expanded iTLA (integrable tunable laser assembly) module with a tuning range 200% greater than traditional alternatives, spanning 12.4 terahertz.

To put it in non-technical terms, Lumentum demonstrated that it can pack far more optical capacity into far less physical space -- which is exactly what you need when you are trying to build AI infrastructure that scales efficiently.

The risks that investors should not ignore

Lumentum is not a simple, low-risk investment. It operates in a component market that has historically been cyclical -- optical networking went through a brutal boom-and-bust cycle in the early 2000s, and the memory of that era still makes some investors cautious. If hyperscaler AI spending slows, Lumentum's order pipeline could compress quickly.

The company also faces competition from well-capitalized rivals. Coherent and others are all active in the data center optics space. Lumentum's differentiation in high-performance lasers and co-packaged optics is real, but maintaining its edge will require continuous R&D investment.

There is also execution risk tied to the Nvidia partnership itself. A $2 billion commitment means Lumentum will need to scale up its manufacturing significantly, which takes time, capital, and coordination across its global facilities. If its timelines slip, it will create a gap between expectations and delivery -- and the market tends to quickly punish high-growth stocks for such gaps.

Given the company's recent run-up, this isn't a stock to bet massively on now. Instead, interested investors should build a responsibly sized position over time through steady dollar-cost averaging, with the expectation of consistent long-term returns.

Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Coherent, Lumentum, and Nvidia. The Motley Fool has a disclosure policy.