We recently compiled a list of the 11 AI News and Ratings You Shouldn’t Miss. In this article, we are going to take a look at where Lumentum Holdings Inc. (NASDAQ:LITE) stands against the other AI stocks.
DeepSeek has quickly gained attention in AI with its R1 model, which delivers high performance at a lower cost. The company has introduced innovations to improve efficiency and accessibility in AI development. DeepSeek’s fast growth, despite having a small team, shows the increasing trend of AI-driven businesses scaling with minimal human resources. Its success also shows the broader shift toward open-source AI models, especially in China, where competition is driving faster innovation and more cost-effective solutions.
UBS’s Insights on DeepSeek R1 and AI Investment Strategies
In a report posted by UBS on January 31, the UBS CIO analyzed the impact of DeepSeek’s R1 model on financial markets and AI investment strategies. The firm expects continued capital spending by hyperscalers, benefiting semiconductor companies, and recommended diversified exposure across AI’s value chain. The declining cost of training large language models is driven by algorithmic advancements and hardware improvements, with R1 increasing AI adoption. Hardware scaling also remains important alongside algorithmic progress to support AI infrastructure investments.
In addition, China continues to play a significant role in AI innovation, with companies like Alibaba developing competitive models. UBS maintained a positive view of Chinese internet firms due to their ability to offer customizable, cost-effective AI solutions. The firm also highlighted the rise of AI-driven startups, emphasizing investment in firms with proprietary data or strong customer retention.
Furthermore, the rapid development of AI software suggests prioritizing physical infrastructure investments over traditional software. AI’s ability to self-improve introduces unpredictability, leading UBS to recommend structured products for volatility exposure while avoiding non-physical assets lacking a competitive advantage.
UBS believes that despite fluctuations, AI investment remains solid, with major tech firms expected to increase capital spending in 2025. AI adoption is also rising, supporting cloud growth and monetization. While volatility may be there due to economic and regulatory factors, AI’s long-term outlook remains positive, with both high-cost and low-cost models expected to coexist.
For this article, we selected AI stocks by reviewing news articles, stock analysis, and press releases. We listed the stocks in ascending order of their hedge fund sentiment taken from Insider Monkey’s database of 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a technician calibrating a laser beam.
Lumentum Holdings Inc. (NASDAQ:LITE)
Number of Hedge Fund Holders: 36
Lumentum Holdings Inc. (NASDAQ:LITE) provides optical and photonic products for data transmission, cloud networking, AI, and industrial laser applications across multiple industries.
Lumentum reported FQ2 2025 non-GAAP EPS of $0.42, exceeding estimates by $0.06, with revenue reaching $402.2 million, a 9.7% increase year-over-year, surpassing expectations by $11.23 million. The company ended the quarter with $896.7 million in cash, cash equivalents, and short-term investments, a decrease of $19.4 million from the previous quarter. For Q3, Lumentum forecasts revenue between $410 million and $425 million, a non-GAAP operating margin of 9.5% to 10.5%, and EPS between $0.47 and $0.53, above the consensus estimate of $0.41.
The company exceeded revenue and earnings expectations in the second quarter, driven by strong demand from cloud customers and advancements in photonics technology. Lumentum is expanding its role in AI and cloud computing by scaling production, improving optical data transmission, and strengthening partnerships with cloud operators. The company reported record shipments of EMLs and began delivering 200G lane speed variants, positioning itself for future growth in AI-driven data centers. Despite challenges in the industrial tech segment, Lumentum remains focused on innovation, with expectations of continued expansion in cloud and networking.
Overall LITE ranks 5th on our list of AI stocks in news that investors shouldn’t miss. While we acknowledge the potential of LITE as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LITE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
