... Trade Reviews Nvidia strengthens AI leadership with Coherent deal

Nvidia strengthens AI leadership with Coherent deal

Nvidia has taken another step to solidify its leadership in AI infrastructure with a multiyear strategic agreement focused on advanced optics technologies. The deal, structured as a nonexclusive collaboration, involves a multibillion-dollar purchase commitment.

By Yazeed Abu Summaqa | @Yazeed Abu Summaqa | 12h ago

Nvidia is investing $2 billion in Coherent to support U.S.-based manufacturing.
Despite the strong financial results, Nvidia shares fell immediately after the announcement.
If NVDA surpasses $190–$192 on strong volume, targeting $200–$210.

Nvidia Coherent investing

The partnership, nonexclusive in nature, covers both research and development and manufacturing capacity for advanced laser and optical networking products critical infrastructure for the rapidly expanding AI ecosystem. As part of the deal, Nvidia is committing multibillion-dollar purchases and securing future access and capacity rights. On top of that, Nvidia is investing $2 billion in Coherent to support U.S.-based manufacturing scale-up and R&D initiatives.

The strategic move aligns with Nvidia’s long-term vision of dominating AI hardware, particularly as demand for high-speed optical interconnects in data centers accelerates. Analysts see this as a forward-looking play: advanced optics could become a $10–15 billion market within five years, and Nvidia’s early stake positions it to capture a significant share.

Strong earnings beat expectations

Last week, NVIDIA reported revenues of $68 billion, surpassing the $66 billion consensus estimate by 3%. Earnings per share came in 5% above analyst expectations, marking a strong quarter. The company also reported 15% quarter-over-quarter revenue growth, driven largely by data center sales and AI accelerator deployments.

Despite the strong financial results, Nvidia shares fell immediately after the announcement market analysts attribute this paradoxical reaction to several factors.

Forward-looking concerns investors may be focusing on Nvidia capital-intensive $2B investment in Coherent. While strategically significant, it represents a long-term payoff, not immediate cash flow. Valuation pressure Nvidia trades at a forward P/E of roughly 55x, elevated compared to peers in semiconductors and AI hardware. Even with strong earnings, the stock may be pricing in near-perfect execution, leaving little room for upside in the short term.

Market sentiment, the broader tech sector has been experiencing profit-taking after a prolonged rally, especially for high-growth AI names. Strong quarterly numbers do not always prevent short-term pullbacks if traders are reallocating capital.

Source: Fullratio

Technical outlook

NVDA is currently in a critical consolidation phase, digesting post-earnings gains while the market evaluates its AI optics strategy. The $170–$190 range is key, with a descending wedge pattern suggesting a potential bullish breakout if NVDA surpasses $190–$192 on strong volume, targeting $200–$210, a drop below $170 could test $165–$160.

While slightly lower volume during pullbacks confirms healthy consolidation. Overall, NVDA remains fundamentally strong, and the next 2–4 weeks especially volume-supported moves above resistance or below support will likely define the short-term trend.

Looking ahead, Nvidia’s investments in Coherent and advanced optics signal potential revenue expansion in 2027–2028. If optical interconnect demand continues to grow at a CAGR of 20–25%, Nvidia could see $1–2 billion in incremental annual revenue by 2028 from these new capabilities.