TD Cowen Highlights Two Telecom Stocks Benefiting from AI Demand

Introduction#

TD Cowen, a financial services firm, has begun coverage on two telecom stocks that are expected to thrive due to increasing demand for artificial intelligence (AI) infrastructure. These companies are recognized for their roles in data center connectivity and optical networking technologies.

Coherent Corp#

Coherent Corp has been rated as a Buy with a price target of $330. The firm believes that Coherent is well-positioned to benefit from the rising demand for AI infrastructure, particularly with the adoption of advanced technologies like 800G and 1.6T. Coherent's long history of innovation in photonics, which is the technology of generating and harnessing light, and its diverse business model are seen as significant advantages.

The company's integrated transceiver business model—essentially a system that combines multiple functions into one device—along with a hybrid approach to sourcing lasers, should help it avoid issues related to overproduction. Analysts also praised CEO Jim Anderson and CFO Sherri Luther for their successful track record in improving company performance. The $330 price target is based on an estimated earnings per share of $7.43 for fiscal 2027.

Ciena#

Ciena has also been initiated at a Buy rating, with a price target of $425, and has been included in TD Cowen’s Top Picks list. Ciena is expected to benefit significantly from the growing demand for AI infrastructure, particularly in data center interconnectivity. The company recently acquired Nubis, enhancing its capabilities in connecting data centers.

Ciena's strong background in long-haul optical technology and its comprehensive fiber optics offerings position it well in the market. Recently, Ciena reported that its direct cloud revenues made up 32% of its total revenue, indicating strong investment from large tech companies in their own transport networks. The $425 price target is based on an estimated earnings per share of $8.90 for fiscal 2027.

In recent news, Ciena raised its revenue guidance for fiscal 2026, reflecting robust demand for its optical products, which has led to positive analyst ratings and price target increases from various firms.