NVDA - Coherent slumps on China AI concerns B. Riley downgrade

2023-06-28 09:32:27 ET

Coherent ( NYSE: COHR ) shares fell more than 2.5% in early trading on Wednesday after concerns about a new semiconductor export curb to China impacted chip stocks and investment firm B. Riley downgraded its shares, citing competition from Nvidia ( NASDAQ: NVDA ) in the optical networking industry.

"In short, it appears Nvidia, which seems to have a significant lead on competition, will be able to provide most of the networking equipment, including switches and routers," analyst Dave Kang wrote in an investor note. "As such, only those that are in NVDA’s supply chain will benefit from the surging AI demand, in our view."

Kang lowered his rating on Coherent ( COHR ) shares neutral from buy, noting that the company is likely not in Nvidia's supply chain. Applied Optoelectronics ( AAOI ) is also believed to not be in Nvidia's supply chain, since it's likely that Nvidia ( NVDA ) will use Mellanox products, given it acquired the company in 2020.

Conversely, Kang believes Lumentum ( LITE ) is in Nvidia's ( NVDA ) supply chain and there is a rumor - albeit unconfirmed - that Fabrinet ( FN ) may also be a supplier.

Analysts are largely cautious on Coherent ( COHR ). It has a HOLD rating from Seeking Alpha authors , while Wall Street analysts rate it a BUY . Conversely, Seeking Alpha's quant system, which consistently beats the market, rates COHR a HOLD .

More on Coherent

• Coherent: Benefiting From Migration To Ethernet Switching Attached To AI/ML
• Coherent Stock: Beware Of Monster Rally
• Coherent: Discounted And Attractive Entry Point For The Medium To Long Term

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