The idea is simple. As companies build bigger AI systems, they need faster connections. Marvell believes buying Lumentum will help it meet that demand and win more business.

Powerful Chips Need Fast Connections

Imagine hiring thousands of talented people, then giving them a slow internet connection to work together. They might be excellent at their individual jobs. But if they keep waiting for information from one another, the whole project slows down.

AI systems face a similar problem. Their chips work together to process huge amounts of information. If data cannot move quickly enough between them, those expensive chips cannot do as much useful work.

That makes the connections between chips an important part of the AI buildout. Lumentum helps address this problem with equipment that sends information as pulses of light. As AI systems grow, that technology can help them move more data efficiently.

Marvell and Lumentum say rising demand for faster connections is pushing the industry toward optical technology. They believe designing the electronic and optical parts together can improve performance and reduce energy use. 

What Marvell Gets from the Deal

Marvell already makes chips and networking technology. Lumentum makes lasers and other optical equipment. Bringing them together could help Marvell offer customers more of the parts they need to connect their AI systems. It could also make it easier to design those parts to work well together.

Think about building a kitchen. The project tends to go more smoothly when the cabinets, appliances, and plumbing are planned together. Discovering that something does not fit halfway through the job creates delays and extra costs.

The same basic idea applies here.

If Marvell can help customers avoid problems and get their systems running sooner, it could have a stronger reason for customers to choose its products.

This also builds on an earlier purchase. The company completed its $3.5 billion acquisition of Celestial AI, another company focused on optical connections, in February. Buying Lumentum would take that strategy much further.

Nvidia Sees an Opportunity, Too

Marvell is not the only company putting money behind Lumentum. In March, NVIDIA (NASDAQ: NVDA) announced a multiyear agreement that included a multibillion-dollar commitment to buy advanced laser components and access future production capacity.

Separately, NVIDIA announced a $2 billion investment in Lumentum to help fund research, expand production, and support a new U.S. manufacturing facility.

That matters because it shows a major AI company is committing money to the technology. It also helps explain why Marvell wants a bigger position in this market. However, expanding production is not instant. Lumentum still has to build capacity and deliver products that meet customers’ needs.

The potential market is substantial. 

In fact, as noted by the Economic Times, citing Goldman Sachs research, reported that the broader market for networking used to connect AI computing systems could grow from about $15 billion in 2026 to $154 billion by 2028. 

Now investors need to see whether that idea turns into more sales, stronger profits, and enough growth to make this enormous purchase worthwhile.

What Marvell’s Lumentum Acquisition Means for Investors

Marvell is betting that helping AI chips work together will become an increasingly valuable business. Buying Lumentum could give it more tools to solve that problem and more opportunities to win customers.

But a deal this large needs to deliver more than promising technology. Investors should watch whether customers choose the company’s products and whether those sales translate into stronger profits. If the company can deliver on both, this acquisition could become an important driver of its long-term growth.

It also must meet float and volume criteria. When stocks are added to the S&P 500, they typically experience a short-term price surge known as the “index effect,” as massive mutual funds and ETFs are forced to buy the shares to mirror the benchmark. 

Historically, newly added S&P 500 stocks see stronger trading volumes and short-term price spikes as funds adjust their holdings. 

The Index Effect Can Be Powerful

On the morning of June 8, Marvell (NASDAQ: MRVL) announced it would join the S&P 500 on June 22. It would soar from about $289 to a high of $329.80 shortly after. Unfortunately, it would get caught up in a Nasdaq drop shortly after that.

Flex (NASDAQ: FLEX), the provider of electronic manufacturing services, said it would also join the S&P 500 on June 22. The stock would jump from about $138 to a high of $165.72 before also diving with the Nasdaq. Or, look at Lumentum (NASDAQ: LITE), which was added to the S&P 500 on March 23, running from about $710 to $800 a share shortly after. 

Reddit May Be Ready To Soar

Reddit (NYSE: RDDT) will officially join the index on August 18, and will AvalonBay Communities (NYSE: AVB), a real estate company. Reddit will also become only the second major social media company in the S&P 500. Other social media companies, such as Pinterest (NYSE: PINS) and Snap (NYSE: SNAP), are publicly traded but are smaller than Reddit in terms of market value. Twitter was once part of the S&P 500, but it was removed after Elon Musk bought the company in 2022.

RDDT’s addition to the S&P 500 comes after a period of strong growth. The company recently reported its second-quarter results and said its sales had grown by more than 60% for the eighth quarter in a row. However, analysts do have their concerns. For one, some are worried about the company’s reliance on Google to bring new users to Reddit.

Two, Reddit has said its search traffic had been unpredictable, with CEO Steve Huffman blaming some of the changes on Google’s growing use of artificial intelligence, including its Gemini-powered AI Overviews. Still, despite those issues, joining the S&P 500 is an important milestone for Reddit. It could bring more attention from investors.

Reddit Enters the Big Leagues

RDDT’s addition to the S&P 500 could give the company an important boost as it continues to grow. History shows that companies added to the index can see increased trading activity and a short-term rise in their stock price as major funds buy shares.

However, the company still faces some challenges, particularly its reliance on Google search to attract new users and the impact of Google’s growing use of AI. While the S&P 500 inclusion does not guarantee that RDDT will continue to rise, it puts the company in the spotlight and could attract more interest from investors.

For now, investors will be watching closely to see whether Reddit can follow the path of other recent S&P 500 additions and turn its new status into continued momentum.

Fueling the latest round of momentum, the company, which makes technology that moves data quickly, reported much better-than-expected results. That’s because AI requires significant amounts of computing power. Companies such as NVIDIA are building powerful computer systems that can handle AI workloads. But there is another important piece of the puzzle: those computers need to move large amounts of data between each other.

That is where Lumentum comes in.

Lumentum makes optical and photonic products that help move data using light, which is becoming increasingly important as AI data centers get larger and more powerful. Considering that AI needs faster ways to move data, optical networking can provide that speed.

All of which benefits stocks like Lumentum. 

In fact, Lumentum’s latest results show how much demand is growing. The company reported adjusted earnings of $3.23 per share for its fiscal fourth quarter. That was much higher than the 88 cents per share it reported a year earlier. It also beat Wall Street’s expectations. Analysts were expecting earnings of about $2.97 per share.

The company also reported $1.01 billion in revenue, up 109% from the same period last year. Analysts had expected about $988 million. The company also became more profitable. Its adjusted operating margin increased to 36.6%, compared with 32.2% in the previous quarter and 15% a year ago.

NVIDIA Is a Major Partner

One of the biggest reasons why investors are excited about Lumentum is its relationship with NVIDIA (NASDAQ: NVDA). In March, NVIDIA announced a $2 billion, multi-year agreement involving Lumentum.

The goal is to help speed up the development and use of advanced optical technology. 

In addition, NVIDIA CEO Jensen Huang has said that NVIDIA and Lumentum are working together on advanced silicon photonics technology. The goal is to help build the next generation of massive AI data centers. This is a big deal because NVIDIA is one of the most important companies in the AI industry. As NVIDIA sells more powerful AI chips, customers also need better networking technology to connect those chips.

The Optical Networking Market Could Explode

The potential market for optical networking is substantial.

Goldman Sachs (NYSE: GS) estimates that the total market could grow from about $15 billion in 2026 to nearly $154 billion by 2028. That would be a massive increase in just two years.

The reason is the rapid growth of AI.

AI companies are building data centers with thousands of GPUs. These chips need to communicate with each other extremely quickly. Traditional copper cables may not be able to handle the amount of data these systems need to move. Optical connections can help solve that problem by using light to transmit information.

What This Means for Investors

Lumentum is becoming an important part of the AI infrastructure story. Most investors think about AI and immediately think of companies making AI chips or software. But AI also needs the equipment that connects all those computers. That equipment is becoming increasingly important as AI data centers grow.

Lumentum is one company that should continue to benefit from this trend. Its latest earnings were strong; revenue more than doubled from a year ago, and its partnership with NVIDIA gives the company an important connection to the AI industry. Plus, the optical networking market could also become much larger over the next few years.

With LITE, the picture is clear: AI needs fast data connections, and Lumentum is helping provide them. If AI spending continues to grow, demand for optical networking could grow with it. That could make Lumentum an important company to watch as the AI boom continues.

Historically, newly added S&P 500 stocks see stronger trading volumes and short-term price spikes as funds adjust their holdings. This year, several companies tied to the artificial intelligence boom are benefiting from that trend, including Marvell Technology, Flex Ltd., and Lumentum Holdings. After all, as demand for AI infrastructure, networking chips, and optical connectivity solutions accelerates, these stocks are attracting attention from both Wall Street and retail investors looking for the next major growth opportunity.

Marvell Gets an Immediate Boost

On the morning of June 8, the company announced it would join the S&P 500 on June 22. As a result, the stock soared about 9% in premarket. 

Fueling even more momentum for the stock, 

Jensen Huang, CEO of NVIDIA, recently described Marvell Technology (NASDAQ: MRVL) as a potential future trillion-dollar company. He highlighted the company’s networking and connectivity chips, which play a critical role in modern AI data centers where thousands of processors must rapidly exchange data to perform complex computing tasks.

Marvell currently has a market cap of $230.4 billion and just posted strong earnings.

“Marvell delivered record first-quarter fiscal 2027 revenue of $2.418 billion, up 28% year-over-year, and guided second-quarter revenue to $2.7 billion at the mid-point, representing 35% year-over-year growth. We expect revenue growth to continue accelerating each quarter throughout fiscal 2027, driven by continued strength in our data center business,” said Marvell CEO and Chairman Matt Murphy, as quoted in a company press release.

Flex Earns a Spot in the S&P 500

On June 22, Flex (NASDAQ: FLEX), the provider of electronic manufacturing services, will also join the index. With a market cap of $55.66 billion, the stock soared from an April low of about $70 to a recent high of $151.92 thanks to its strong position in the AI infrastructure market.  

The company just posted EPS of 93 cents, which beat by five cents. Revenue of $7.48 billion, up 16.9% year over year, beat by $500 million. Plus. Barclays’ analysts just raised their price target on Flex to $203 from $174 on June 4, keeping a Buy rating.

Lumentum Offers a Preview of the S&P 500 Effect

Lumentum (NASDAQ: LITE) was added to the S&P 500 on March 23, running from about $710 to $800 a share shortly after. 

Investors are rushing to buy optical networking companies, like LITE, because they’ve become an essential part of the artificial intelligence boom. 

That’s because optical networking, which transmits data as pulses of light, can deliver far more bandwidth and higher speeds than traditional copper wiring. In addition, Nvidia announced a $2 billion multi-year agreement with LITE in March to help accelerate the adoption of advanced optical technologies. 

Also, according to Goldman Sachs, optical networking is quickly becoming the next hot trend for the AI boom, as demand drives the need for faster data exchange and lower latency. 

The Opportunity Ahead

S&P 500 inclusion remains one of the strongest catalysts a stock can receive, often triggering immediate institutional buying and increased investor interest. 

For companies, such as those mentioned above, operating at the center of the AI revolution, the impact can be even greater. As artificial intelligence spending continues to expand, investors may want to keep a close eye on newly added S&P 500 companies that are positioned to capitalize on one of the market’s most powerful long-term growth trends.

One reason is the growing excitement around Marvell. Jensen Huang, CEO of Nvidia (NASDAQ: NVDA), just said Marvell could be the next potential trillion-dollar company. He highlighted the importance of Marvell’s networking and connectivity chips, which help data centers move information quickly between thousands of connected processors. His comments helped drive a rally in Marvell and other optical networking stocks.

Another reason is that optical networking has become a critical technology for artificial intelligence. Unlike traditional copper cables, optical networks transmit data using pulses of light, allowing for much higher speeds, greater bandwidth, and lower delays. As AI systems grow larger and more complex, the need for faster data transfer continues to increase.

AI Networking Boom Continues

According to Goldman Sachs, networking is becoming the next major area of investment in AI infrastructure. Faster, low-latency data exchange is essential for improving AI computing performance and supporting increasingly powerful models.

The firm estimates that the optical networking market could grow from roughly $15 billion in 2026 to nearly $154 billion by 2028.

In addition, we have to consider that the industry is facing a significant supply-demand imbalance. As artificial intelligence companies build larger computing clusters, they need tens of thousands of GPUs connected through ultra-fast optical links. At that scale, traditional copper cables can no longer deliver the required performance.

To help, Nvidia has reportedly asked suppliers to increase production capacity for indium phosphide lasers by as much as 20 times by 2030. The company has also committed approximately $2 billion to help secure future supply.

As artificial intelligence adoption accelerates, companies that provide the optical networking technology needed to connect massive systems could be positioned for substantial growth.

Early Days for Artificial Intelligence

For one, consider this. There are about 4,000 operational data centers in the U.S. right now. An additional 1,500 to 3,000 are being planned or under construction. According to Pew Research, the South has 754 planned data centers. The Midwest has 419 planned. The West has 277 planned, and the Northeast has about 106 planned. 

Two, the artificial intelligence boom is still accelerating.

Forecasts now place the value of artificial intelligence between $1.7 and $3.5 trillion by the early 2030s, with the most aggressive estimates topping $7 trillion by 2035. And judging by the surge in corporate investment, the market is moving toward the high end of those projections.

Three, warnings of an “AI bubble” are increasingly being dismissed by top analysts.

Goldman Sachs says, “it believes the AI story is just getting started – and the investments that seem huge today will be dwarfed by the benefits AI will deliver,” as noted by Quartz.com. 

Long term, the investment bank says that artificial intelligence adoption could add $20 trillion to the U.S. economy. AI, according to Goldman Sachs, is already delivering those gains in productivity when deployed right.”

JPMorgan’s Mary Callahan Erdoes added, “AI is presenting opportunities not fully appreciated or understood yet,” as noted by CNBC. “AI itself is not a bubble. That’s a crazy concept… We are on the precipice of a major, major revolution in a way that companies operate.”

“So, if you say to yourself, is AI in a bubble, I feel you have to get very granular on how you’re going to answer that, because in the U.S., we’re starting to gain traction, but we’re nowhere near the ability to have the stuff all to the bottom line.” 

For investors, that means the upside potential is still there.