Photonics Bull Case: POET and AAOI Into 2027

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I’ve been watching the photonics sector. The AI datacenter buildout is the catalyst. Moving data between chips and servers at the speeds these workloads require is pushing copper to its limits.

That red-glowing optical cable on the back of your TV, the one that runs to your receiver, transmits data as pulses of light through a fiber. That’s been standard on consumer electronics since the late 80s. Data centers need to do the same thing at a scale and speed that makes copper wire a bottleneck, not a design choice. The buildout is just getting started.

Two names I’m paying attention to heading into 2027.

POET Technologies is a fabless semiconductor company building an optical interposer, a platform that integrates lasers, modulators, and detectors onto a single substrate instead of assembling discrete components. If it works at volume, it’s a cost structure story. Traditional optical engines are expensive because the assembly is precise and largely manual. POET’s approach could change that math. They have design wins and are moving toward commercialization. The risk is the gap between a working prototype and a product that ships in volume. That gap has ended a lot of photonics companies. Close it and the upside is significant.

AAOI (Applied Optoelectronics) is a different kind of bet. They already make transceivers. Hyperscalers are spending heavily on 800G and 1.6T transceivers. AAOI has the manufacturing and customer relationships to be in that mix. The stock is off its 2026 highs and revenue has been improving. Recovery story with a real tailwind.

More AI compute means more optical interconnect demand. That’s the whole thesis, and neither of these is a blue chip.