Why Lumentum Holdings Stock Leaped More Than 5% Skyward on Wednesday

Investors saw much to like with news coming from, and about, optical and laser technology specialist Lumentum Holdings (NASDAQ: LITE) on Wednesday. They bid the stock up by over 5% on the day, thanks in no small part to the company achieving a new speed benchmark and accompanying this with an update on the potential future of its business.

Getting faster and (hopefully) richer

Lumentum and its business partner Keysight Technologies announced that morning that they would together demonstrate their optical technology achieving a speed of 448 gigabytes per second. This was to take place at the annual Optical Fiber Communications Conference.

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According to the two companies, their collaboration in this tech "addresses the escalating bandwidth demands of artificial intelligence (AI) and machine learning (ML) applications." Such functionalities require considerable computing resources and wider "pipes" in order to transmit effectively.

Meanwhile, the business side of Lumentum's operations also brought the bulls to the stock. Management updated its guidance, stating that it foresees $750 million in quarterly revenue, filtering down to a healthy operating margin of 20%.

It also pointed out that it has a raft of next-generation optical and laser products coming out in the short- to mid-term future that should drive sales.

The future is now

Some investors have lately been somewhat skeptical about the promise of AI. However, there's a big chunk of the market that fervently believes the technology will power the fundamentals of the companies utilizing it, effectively harnessing its functionalities. I happen to be in the second camp, and as such I'm optimistic about the future of tech envelope-pushers like Lumentum.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Lumentum. The Motley Fool has a disclosure policy.