30 Best and Worst Data Center Stocks

29. Ciena Corporation (NYSE:CIEN)

Downside Potential: -12%

Number of hedge funds: 40

Ciena Corporation (NYSE:CIEN) offers optical and packet networking systems, services, and automation software, forming the essential infrastructure that powers the internet and global communications networks. These services are critical for connectivity within and between data centers. The company’s optical networking solutions, accounting for 66% of its FY 2024 total revenue, are pivotal in enabling high-performing, reliable, efficient, and scalable data center operations. The rising digital demand and bandwidth consumption will drive significant growth in the company’s network expansion.

To enhance its optical networking business and maintain its competitive edge, Ciena Corporation (NYSE:CIEN) is intensifying its R&D efforts, as demonstrated by the recent launch of its next-generation WaveLogic 6 Extreme product. The company also plans to increase investments in photonic line systems and coherent pluggables for data center applications, facilitating business growth. Moreover, restrictions on Huawei have created long-term opportunities for the company amid increasing domestic infrastructure investments by the US Government.

The stock has performed strongly, with its price rallying around 90% over the last year (before the 27th January selloff). While it remains fundamentally robust, the potential for further share price upside is limited due to the recent rally. However, in mid-December 2024, a Jefferies analyst identified Ciena Corporation (NYSE:CIEN) as “a top idea for 2025,” considering it a structural long-term winner at a more attractive valuation. According to the analyst, investors still “grossly underestimate” the impact of AI-based traffic, and the company will benefit from the completion of excess inventory reduction among its Tier 1 customers.