Corning Plunges 15%, Crushing Sluggish AI Investment Theme! These ETFs Also Under Pressure

According to Benzinga, AI infrastructure-related trading faced a harsh test on Tuesday (28th), as a sell-off in optical component stocks spread to ETFs focused on a critical yet under-discussed area of the AI boom: fiber optics and photonics.

Corning (GLW-US), the glass and fiber optics giant, plunged 15% despite reporting better-than-expected second-quarter results. According to CNBC, the stock is on track for its worst day since October 8, 2002, when it fell 17.3%.

Corning reported adjusted earnings per share of 78 cents, above Wall Street's forecast of 76 cents, and revenue of $4.74 billion, exceeding the expected $4.61 billion. However, the company guided for core revenue growth of 16%, or $4.9 billion to $5.0 billion, slightly below the FactSet estimate of $5.0 billion.

The weakness spread across the optical supply chain, with Lumentum Holdings (LITE-US), Marvell Technology (MRVL-US), AXT (AXTI-US), and Coherent (COHR-US) falling 8% to 12% on Tuesday.

The sell-off also hit ETFs focused on the optical space. KraneShares Photonic & Optical ETF (LUMA-US) dropped over 10%; Tema Photonics & Optical ETF (LAZR-US) and Tuttle Capital Pure Play Photonics ETF (FOTO-US)—two ETFs dedicated exclusively to fiber optics and optical technologies—declined between 9% and 11%.

AI’s Next Bottleneck

While Nvidia (NVDA-US) and other chipmakers dominate the AI investment narrative, investors are increasingly focusing on the infrastructure needed to support increasingly complex AI workloads.

AI data centers require massive bandwidth to transmit data at high speeds between GPUs, servers, and memory systems. As companies seek to increase speed, reduce latency, and lower power consumption, fiber optics, optical transceivers, lasers, and photonic technologies are becoming increasingly critical.

Corning has benefited from this trend through its optical communications business. The company has signed multiple large agreements with hyperscale cloud providers, including a recent multi-year deal to support Amazon’s (AMZN-US) expanding data center network.

However, Tuesday’s sell-off highlighted market concerns: despite strong long-term demand, AI infrastructure suppliers may face tougher growth expectations ahead.

One of the hardest-hit ETFs was LUMA, a fund offering investors direct exposure to the photonics and optical communications industry.

The fund holds stakes in several key optical communications supply chain companies, including:

- Lumentum Holdings: Develops optical and photonic products for communication networks. - Coherent Corp.: Supplier of laser and optical technologies. - Marvell Technology: Provides networking chips for AI data centers. - AXT Inc.: Supplies materials for the optoelectronics industry.

As the market shifts focus from AI chips to the connectivity layer underpinning data center operations, LUMA has emerged as one of the most representative ETFs.

FOTO primarily invests in companies whose core business is photonics, offering exposure to optical components, lasers, and communications technologies.

Meanwhile, LAZR adopts a broader investment strategy, covering the entire photonics ecosystem, including companies in optical communications, laser technology, sensing, and imaging.

Both ETFs have benefited from growing investor interest in the 'AI beyond GPUs' theme, but Tuesday’s sharp decline also revealed their sensitivity to shifts in market sentiment around AI infrastructure spending.

AI Optical Communications Investment Theme Faces a Crucial Test

The long-term outlook for optical communications infrastructure remains closely tied to the ongoing expansion of AI data centers. Hyperscale cloud providers continue to invest billions in expanding computing capacity, and as AI models demand more processing power, the need for high-speed data transmission is expected to grow.

However, investors are becoming more cautious when selecting AI beneficiaries, especially companies whose valuations have risen significantly.

For LUMA, FOTO, and LAZR, Tuesday’s sell-off becomes a critical test: can the AI optical communications sector sustain its growth momentum, or will the market demand more concrete evidence that the fiber optics boom can ultimately translate into sustainable profit growth?