AI has driven the markets over the past two years and proven that the technology is truly a game changer – and for multiple games. AI has impacted cloud computing, network services, content and graphic design – the list seems endless.
While this is undoubtedly good for the economy and has helped push the stock market to record levels, it also creates profits for individual companies and their investors, even beyond the expected horizon of AI stocks.
Looking at the technology sector and its relationship to AI, Citi’s Atif Malik, an analyst ranked seventh among thousands of Wall Street equity professionals, highlights networking equipment as a segment that will continue to thrive in the coming year – and bases his opinion in part on the impact of AI.
“After the strong outperformance of the network equipment group, investors are looking for next areas of AI dislocations in networks. After ‘Phase 1’ of Ethernet networking, we move into ‘Phase 2’ and ‘Phase 3’ where the acceleration of ASIC solutions drives the need for AI infrastructure intra- and inter-server networks and data center connections (DCI),” explains Malik .
Malik not only offers broad commentary; he singled out two AI infrastructure framework stocks for closer attention, naming both as “top picks” for 2025. To gauge broader sentiment, we ran both names through the TipRanks database to see how the rest of Wall Street views their prospects. Here are the details.
Coherent company(COHR)
The first stock we’ll look at is Pennsylvania-based Coherent, a company with a solid reputation in several high-tech areas. Coherent started in the semiconductor industry, as a maker of high-performance optics and materials used in chip manufacturing, and later added a wide range of industrial-grade optoelectronic components, optical and laser subsystems for communications and industrial applications, and high-end engineering instrumentation. The company is active in all aspects of these areas, including research and development, manufacturing, sales and marketing, distribution and service and support.
Coherent’s products, especially lasers, optoelectronics and optical systems, are commonly used in a variety of high-tech sensor systems – they can be found in visual scanners, in touch screens, in automotive LiDAR units, to name a few . Sensors enable much of modern automation, which links them directly to AI technology. Groundbreaking AI systems, designed to get the strongest possible results from automation, are powered by high-tech sensors – and are needed to parse the data pulled in by the countless sensor technology systems in our digital world.
But perhaps the most important factor for Coherent to look at right now is the company’s line of optical circuit switches, an essential technology in AI data centers. The AI boom has led to a massive expansion of data centers – which in turn has led to a spike in demand for the peripheral technologies on which data centers depend. It’s no coincidence that Coherent’s shares are up 145% year to date for 2024, or that the company has seen a steady upward trend in sales and profits in recent quarters.
In the company’s latest quarterly report, which covers the first quarter of 2025 (September quarter), Coherent reported total revenue of $1.35 billion. This revenue figure was 28.6% year over year and exceeded forecast by $30 million. The company’s non-GAAP earnings per share were up 74 cents per share from just 16 cents in 1Q24 and came in 13 cents per share above expectations.
Citi’s Malik noted Coherent’s strong growth trend over the past year and extrapolated it forward, writing: “As model sizes grow and require more scaled-up computing, we see the optical space directly benefiting from increased density, latency and complexity of AI infrastructures. We estimate that COHR, with its broad AI optics platform ranging from lasers (VCSEL, EML and CW) to transceivers, is well positioned to be a major AI winner entering C2025E… We model AI sales to reach ~$1.7 billion in FY2025, +180% from FY2024 and continue to view COHR’s strong AI sales as not only a key driver of overall sales, but also as a key factor for the company’s multiple expansion.”
Malik further outlines why this stock is likely to continue on its upward path: “We believe the Street continues to underestimate COHR AI sales and the new management’s ability to quickly achieve its objectives to 1) further focus on the high growth/profitable businesses, 2) implementing a company-wide new price/cost optimization strategy, 3) improving COHR’s operational efficiency.”
The five-star analyst then gives the stock a buy rating, backed by a Street-high price target of $136, which indicates a one-year gain of 27.5%. (To view Malik’s track record, click here)
Malik is confident in this, but so are most of his colleagues; The stock’s Strong Buy consensus rating is based on 13 recent reviews, including 11 Buys and 2 Holds. COHR shares are trading at $106.64 with an average price target of $116.23, suggesting an upside of 9% on the one-year horizon. (To see COHR stock forecast)
Ciena(CIEN)
The next Citi pick we’ll look at is Ciena, a leader in optical and routing systems, automation software and related services. Ciena’s product lines include software-defined platforms for optical networking; programmable, scalable, SDN-ready routing and switching platforms; software systems for controlling automation and analytics for managing network infrastructure and services; and intelligent automation software built specifically to put AI to work in network management.
Ciena supports its products with a full range of support services. These include network building, operations management and support, network improvements and expansions, and a variety of solutions to bring services to market.
This company is closely connected to network systems, which in turn are connected to intelligent automation and AI. Ciena’s solutions fit that bill, helping customers optimize operations, support monetization strategies, and scale network architectures – all while delivering near-exponential, AI-powered gains in traffic. What’s more, the company’s products are connected to DCI, optical data center interconnect services, and Ciena is poised to deliver a range of benefits to its customers through its DCI services – in terms of efficiency and scalability.
In terms of results, Ciena exceeded expectations in its recently released Q4 2024 earnings release; total revenue was $1.12 billion, about flat year over year, but $20 million above estimates. However, operating income came in at non-GAAP earnings per share of 54 cents, 11 cents below forecast. That seemed to make little difference to investors, who sent stocks higher in the wake of the report’s release.
Citi’s Malik is also taking a positive stance. Assessing Ciena’s prospects, he expects the company to take full advantage of a recovering market and the AI trend in 2025. He writes about this technology company: “Ciena has an established leadership position in the DCI application of the optical transport market, and While the overall optical transport market remains weak, with sales down year-over-year, due to inventory depletion, macroeconomic concerns and weakness in China, the market is expected to grow again in 2025. Additionally, we believe Ciena will benefit from a growing AI-related DCI opportunity with ZR/ZR+ optical products not included in the optical transport market data. Our recently increased FY26 estimates reflect stronger adoption of pluggables in and around the data center, an opportunity that is not being captured in the company’s 6-8% growth target.”
Along with a buy rating, Malik sets a price target of $98, implying a 9% upside for the coming year.
Ciena claims a consensus rating of Moderate Buy from The Street, based on 13 reviews divided into 8 Buys and 5 Holds. However, the shares are priced at $89.72 and their average price target of $89.46 reflects over 99% upside this year, suggesting it is currently fully valued. (To see CIEN stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is for informational purposes only. It is very important to do your own analysis before making an investment.
