Silicon photonics selloff splits AI sector as Serenity backs SIVE, AAOI

The optics industry has seen heavy selling, resulting in a massive decline in the stock prices of Applied Optoelectronics (NASDAQ: AAOI). The same trend was seen in the shares of Coherent (XNYS: COHR), Lumentum (NASDAQ: LITE), and Sivers Semiconductors (STO: SIVE).

This proves a marked distinction within the AI industry between stocks that are being traded because of momentum and others that are affected by physical supply chain issues. According to AI stock analyst Serenity, there is no reason to panic as far as the decline in AAOI and SIVE stocks is concerned. It means that one should enter the market and not get out of it.

Based on a Motley Fool analysis cited by AOL, the decline in the share prices in the industry can be attributed to a decline in the semiconductor market in Korea and not necessarily due to any problem in the companies themselves. The VanEck Semiconductor ETF lost 7% while NVIDIA lost 4% on that particular day. The CBOE Volatility Index rose by 12.8%, which shows there is a shift in the industry but no actual crisis. The biggest losers were AAOI (-13.9%), COHR (-10.4%), SIVE (-8.7%), and LITE (-7.4%).

Contrarian perspective of Serenity

In light of the decline in stocks in the optics sector, an X user asked Serenity if she had lost faith in photonics. Serenity’s answer was straightforward – “I’m actually even more bullish as prices drop.”

According to Serenity, SIVE has a market cap of $1.9B and will be worth its strategic position in the silicon photonics supply chain. Based on her X post, SIVE’s partners include GlobalFoundries in reference lasers, Ayar Labs in NVIDIA’s NVLink co-packaged optics (CPO) ecosystem, POET Technologies & Jabil in next-generation 1.6T transceivers, and O-Net in ELS mass production. Moreover, Serenity went on to say that SIVE will be proven time and again as an integral partner in building up the optical networking solutions of hyperscalers. SIVE is currently being used by many suppliers because of the problem with the continuous wave laser source supply.

oh i think u misunderstand… I’m actually more bullish than ever as prices go down. $SIVE at ~$1.9B MC you have:

– $GFS reference laser
– laser for Ayar and others in $NVDA NVLink ecosystem for CPO scale up
– $POET and others for CPO scale out
– $JBL and others for 1.6T+… https://t.co/pLs3LlVC2q

— Serenity (@aleabitoreddit) June 25, 2026

BlockBeats expanded Serenity’s thesis by stating that recent negative articles on SIVE in Sweden, including their 15% increase in shares, would be attributed to the merger approval process and Nasdaq’s mechanism for listing companies rather than any decline in financial performance. Additionally, Serenity claimed that the company’s $140 million convertible note is insignificant to most U.S. institutional investors because SIVE’s gross margin is roughly 60%.

With AAOI, Serenity highlighted that management plans to generate about $471 million in monthly revenue during the second half of 2027 and has raised approximately $1.4 billion through an at-market equity offering to provide working capital to support further equity growth. Serenity then compared AAOI with Nebius, which was valued at ~$70 before its operating metrics became able to support its valuation and subsequently traded at over $250.

Real-life example of segmented pricing

The selloff of the photonics sector came after the recent stress test that indicated the selective flow of capital in the AI trade.

On June 4, Broadcom released its earnings report and presented strong results for the quarter, such as $22.2 billion in revenues and 143% year-on-year growth in revenues from AI semiconductors. Nevertheless, its forward guidance was not up to the increased expectations. As a result, Broadcom’s stock price dropped by 12.6%, Micron lost 7%, and AMD more than 4% in pre-market trading.

AAOI’s stock price demonstrated opposite dynamics, increasing by 11.8% and closing at the level of $202.89.

This dynamic is consistent with the recent trend observed previously mentioned in a Nikkei Asia report. The AI trade is starting to be segmented in terms of the investors’ approach to companies, depending on whether they have demand and execution risks or supply risks. Hardware related to bottlenecks such as laser diodes, optical transceivers, and indium phosphide substrates, started being traded based on the available capacities rather than sentiment. Capital has tended to shift toward suppliers where production limits, not order intake, are the primary constraint.

There is still execution risk related to fundamentals

The argument for buying either stock relies upon significant increases in production that have not happened thus far. AAOI’s revenue for Q1 2026 was $151.1 million (an increase of 51% from last year), but it reported a loss of $14.3 million and missed consensus estimates as well, as per TechFlow.

The company is upgrading its Texas manufacturing lines from 4-inch to 6-inch wafers, a transition that will allow it to produce 3.5x more laser diodes, according to Kucoin. Rosenblatt Securities increased its price target for AAOI to $220 and named it one of its top picks. B. Riley, on the other hand, gave a neutral rating and flagged potential delays in 800G mass production until the second half of 2026.

Currently, AAOI has a market cap of about $10 billion, and based on trailing earnings, it is not profitable. Coherent trades at 189 times trailing earnings and Lumentum at 146 times, per the AOL report, leaving a thin margin for error across the optics group if hyperscaler capital expenditure sentiment shifts.

For SIVE, the test is whether Nasdaq listing execution and partnership revenue from the CPO ecosystem convert into the kind of quarterly numbers that justify a $1.9 billion valuation for a company still in early commercialization.

Investors watching for resolution can track two catalysts: AAOI’s 6-inch wafer production timeline in the second half of 2026 and SIVE’s progress on converting its CPO pipeline partnerships into booked revenue.

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