Key Highlights

  • Coherent extended Thursday's surge into Friday, trading near $337.04, though the stock did not appear among the S&P 500's top 20 closing gainers, suggesting the final move was smaller than intraday readings.
  • Thursday's initial jump was tied to the company's PhotonLink push and Bernstein starting coverage with an Outperform rating; Friday's follow-through was linked to broader AI data-centre expansion enthusiasm.
  • Other optical names joined the move, including Applied Optoelectronics, with Lumentum and Corning also showing strength on Thursday.
  • Hard-drive makers Seagate and Western Digital, also recent AI winners, plunged the same day on a Toshiba capacity report, a reminder that momentum stocks can reverse quickly on a single Supply headline.

Coherent (NYSE:COHR) makes lasers, optical transceivers and the materials behind them. In AI data centres, its products help move huge amounts of data between processors using light instead of electricity. That has made it one of the market's favourite plays on AI networking, and on Friday the run continued. Shares extended their gains, trading near $337.04. The size of the closing move was not confirmed, and the stock did not appear among the S&P 500's top 20 gainers at the close, suggesting the final gain may have been smaller than intraday readings.

Thursday's Spark

The run started on Thursday, October 1, when Coherent soared. That jump was tied to the company's PhotonLink push and to Bernstein starting coverage of the stock with an Outperform rating.

On Friday, the follow-through was linked to AI data-centre expansion. When investors believe data-centre spending will keep growing, Demand for the optics that connect thousands of GPUs tends to rise with it.

Other optical names joined. Applied Optoelectronics jumped, with Lumentum and Corning also showing strength on Thursday.

AI Hardware Was the Place to Be

Friday's broader backdrop was friendly to companies like Coherent. Hewlett Packard Enterprise closed at an all-time high after a $1.2 billion AI rack order from Vultr. Super Micro Computer soared on a NetApp partnership. Nvidia hit a record high during the session, and Arm, Teradyne and Monolithic Power were among the biggest chip gainers.

The macro trigger was the September jobs report. The US added 29,000 jobs against expectations of about 84,000. Traders sharply cut the odds that the Federal Reserve would raise rates again in October, after its first hike since 2023 on September 16. Lower rate expectations help high-growth tech stocks, whose value depends on profits years out.

The Nasdaq-100 closed at a record 30,807.93, up 306.37 points. The S&P 500 added 56.27 points to 7,722.72. The Nasdaq Composite reached an intraday all-time high before closing at 27,190.86.

Momentum Cuts Both Ways

Back-to-back gains can be a sign of strong conviction, but they also raise the bar. Stocks that have run up quickly can be more vulnerable to sudden pullbacks if the AI spending story wobbles.

There were reminders of that risk on Friday. Hard-drive makers Seagate and Western Digital, which had also been AI winners, plunged after reports said Toshiba plans to double hard-drive capacity. A single supply headline was enough to knock them to the bottom of the S&P 500.

Bond yields also pushed back. Treasury yields fell after the jobs report but reversed to close higher, with the 10-year near its highest level since 2002. And breadth was narrow, with most S&P 500 stocks still below their 50-day moving averages.

Watching for More Coverage Initiations

The Federal Reserve meets on October 27-28. Signs that the Fed will hold steady could keep money flowing into AI hardware, while hotter Inflation data could reverse the mood.

Earnings season begins with PepsiCo on October 8, Delta on October 9 and the big banks on October 13 and 14. For Coherent, the key signals will be orders and outlooks from AI customers and fellow suppliers, and whether more analysts follow Bernstein in starting coverage on the stock.