Key Takeaways
(P1) Lumentum Holdings will join the Nasdaq 100 index on May 18, a move that follows the optical-component maker’s stock surging 145% year-to-date and swelling its market capitalization to $70 billion.
(P2) "We view the Nasdaq 100 as a preferred play on the AI buildout relative to more traditional large-cap growth indexes," Scott Chronert, a strategist at Citi, said in a note to clients.
(P3) The addition to the prestigious index, which includes the 100 largest non-financial companies on the Nasdaq, is a major validation for Lumentum. The company only joined the S&P 500 in March. Lumentum will replace real-estate analytics firm CoStar Group, whose market value has fallen to roughly $13 billion after its shares lost half their value this year.
(P4) The inclusion means that exchange-traded funds and other investment vehicles that track the Nasdaq 100, with over $600 billion in combined assets, will be required to buy Lumentum shares. This forced buying pressure can create a near-term tailwind for the stock, which already ranks as the sixth-best performer in the S&P 500 this year.
Lumentum's ascent is powered by the artificial intelligence boom, with its transceivers and lasers forming a critical part of the high-bandwidth connectivity required for data centers. On an earnings call this week, CEO Michael Hurlston said the company's technology has seen increased demand to support the massive scale-out of AI networks.
"To enable this, we provide critical hardware components that provide high-density optical interconnects while meeting aggressive power and performance targets,” Hurlston said. The stock's 145% gain in 2026 follows a 339% surge in 2025, highlighting intense investor interest in companies that provide the picks and shovels for the AI revolution.
The Nasdaq 100 has gained about 16% so far this year, doubling the S&P 500’s 8% rise. Chronert noted that while the index’s forward price-to-earnings multiple of 25x is “not inexpensive,” it is near pre-pandemic levels, suggesting the valuation is not yet in bubble territory despite the strong performance.
This article is for informational purposes only and does not constitute investment advice.
