Is Coherent Corp. (COHR) a Secret AI Stock Worth Investing in Now? – Yahoo Finance

May 5, 2025

Recently, I put together a list of 11 Hidden AI Stocks to Buy Now. In this piece, I’ll explore how Coherent Corp. (NYSE: Cohr) compares to these other emerging AI stocks.

David Grain, who is the founder and CEO of Grain Management, appeared on CNBC on May 1st. He discussed the increasing demand driven by AI for data centers and the uncertainties related to tariffs. His main worries about tariffs revolve around their potential to affect costs, disrupt supply chains, and generally impact business operations and expansion plans. Interestingly, he also pointed to reasons why investors remain optimistic about broadband and digital infrastructure. Grain termed broadband as an essential service and noted that the appetite for quicker connections isn’t waning. Thus, global regulatory support for broadband expansion remains strong. He mentioned that the administration has facilitated projects, easing regulations in the infrastructure domain. It’s clear, he said, that there’s bipartisan backing for infrastructure, particularly in broadband, as it’s beneficial for economic growth at both local and state levels.

After Deepseek’s announcement, there were reports that some firms might cut back on their spending in data centers. Yet, the latest revenue figures suggest that investments in the field are continuing. Grain elaborated on current investment trends and mentioned that demand isn’t decreasing; however, the construction of new data centers still relies heavily on the availability of dependable, high-capacity power.

In sifting through various financial media, we compiled a list of top AI-related stocks. These were selected based on their popularity among hedge funds and the positive outlook from analysts. The stocks were ranked according to how many hedge funds held shares as of the fourth quarter of 2024.

So, why do hedge funds gravitate towards these stocks? It’s straightforward. Our research suggests that following the top picks of leading hedge funds can often lead to better market performance. In fact, a quarterly newsletter strategy focused on selecting 14 stocks, both small and large, has yielded a whopping 373.4% return since May 2014, significantly outperforming the benchmark by 218 percentage points.

Is Coherent Corp. (NYSE: COHR) among the top hidden AI stocks to consider now?

Number of hedge fund holders: 71

Coherent Corp. (NYSE:COHR) focuses on the development, manufacturing, and sales of engineering materials, optoelectronic components, and optical systems. Their products are crucial across various markets including industry, communications, electronics, and instrumentation globally, particularly with the rise in demand for AI-driven components like optical transceivers for data centers.

The company reported record datacom revenue in FQ2 2025, notably driven by the adoption of coherent 800g transceivers. This represented a 79% increase year-over-year. Moreover, production of indium phosphate, essential for high-speed data transmission used in AI data centers, has tripled year-on-year.

A revision from Raymond James projected $22.2 billion in AI backend transceiver sales by 2030, with an annual growth rate of 30%. Their estimates for 2027 AI backend revenues shifted from $7.1 billion to $7.5 billion. Notably, Raymond James analyst Simon Leopold upgraded Coherent’s stock from outperform to strong buy, although he adjusted the price target down from $110 to $91.

In an investor’s letter from Diamond Hill Select Strategy, they noted:

“Other key contributors in Q4 included Amazon, Wesco, and Coherent Corp. (NYSE: Cohr). Coherent stands out as a leader in materials and lasers for industrial and communication markets. The persistent demand for optical transceivers used in AI data centers is strong, leading to new order increases that hint at continued revenue growth and momentum.”

Overall, Coherent ranks 3rd place on our list of hidden AI stocks to buy now. While we see its growth potential as an investment, we do believe AI stocks, in general, might provide even higher returns, and perhaps in a shorter timeframe. Some AI stocks have surged since early 2025, contrasting with popular ones that have dipped roughly 25%. If you’re looking for AI stocks with even more potential, those trading under five times their revenues are worth a look.