Motley Fool picks Lumentum over Nvidia and AMD as its top AI stock for November

The Motley Fool has named Lumentum Holdings (NASDAQ: LITE) its best AI stock to buy in November, ahead of Nvidia and AMD. Writer Harsh Chauhan argues that the company, which makes optical networking parts for AI data centres, could upstage both chip giants when it reports on Nov. 5.

This is an opinion piece, not a deal. There is no Nvidia transaction behind it. The useful question for you is who pays for AI networking, who gains, and what the pick assumes.

Short answer

The pick is a bet on one earnings report and one bottleneck. Lumentum will release fiscal first-quarter 2027 results on Thursday, Nov. 5, after the market closes. The call is at 5 p.m. ET.

If you want the AI trade but not another Nvidia position, this is the argument on the table. It is also a volatile one. Read the risks below before you act on it.

The numbers at a glance

Who pays and who gains

AI chips need fast access to data. According to the article, optical networking is in demand because copper cables limit that speed. Lumentum sells the lasers, transceivers and optical switches that move the data.

The buyers are the big cloud operators building AI clusters. On its August call, Lumentum said its lead Tier 1 hyperscale customers are driving a rapid move from 800G to 1.6T technology. Those buyers pay the prices.

Lumentum gains if supply stays tight. The Motley Fool piece cites McKinsey estimates that 1.6 Tbps transceiver supply could be 30% to 40% below demand through 2029. For 800 Gbps parts, demand could run 40% to 60% above supply through 2027. The article says that shortage is pushing up prices and lifting Lumentum's margins.

Nvidia and AMD are not losers in this story. Their chips drive the demand for the networking parts. The argument is only that Lumentum has more room to surprise.

What Wall Street expects

Analysts expect a big quarter. MarketBeat lists estimates of $4.21 per share on $1.25 billion in revenue. A year earlier the company reported $1.10 per share on $533.80 million. The Motley Fool puts the EPS estimate at $4.22, a 284% jump, and revenue growth at 135%.

Those estimates sit inside the company's own guidance. In August, management guided first-quarter revenue to $1.225 billion to $1.275 billion. The author's case is that Lumentum can beat that. The stock also needs a beat to justify its price.

On the same August call, CEO Michael Hurlston said "we expect the 1.6T transceiver uptake to intensify starting in fiscal Q1". That is the main thing to listen for on Nov. 5.

The long-term bet

The article leans on a Goldman Sachs estimate that optical networking revenue could rise from $15 billion in 2026 to $154 billion in 2028. It also notes that Lumentum's adjusted EPS was $8.67 in fiscal 2026.

The author then builds a scenario. He assumes EPS of $48.28 in fiscal 2029 and a 30x multiple, which gives a share price of $1,448, or a 58% gain. That is the writer's assumption, not a forecast from Lumentum or an analyst consensus. Treat it as one possible outcome.

The risks

• The stock is volatile. It has a 52-week range of $184.20 to $1,143.00. It also fell 19% from its Oct. 9 high, according to the article.

• The valuation is still high. The article calls 43 times forward earnings a good deal. That price already assumes fast growth.

• The estimates are the bar. A result that merely meets the numbers may not satisfy buyers who expect a beat.

• The sources are not neutral. The disclosure says the Motley Fool has positions in and recommends Lumentum, Nvidia and AMD. The author says he has no position in any stock mentioned.

What happens next

Nvidia and AMD also report in November, according to the article, so the three results will be read together. Watch four things on Lumentum's call: revenue against the $1.225 billion to $1.275 billion range, margins, any update on 1.6T transceiver shipments, and the demand outlook for 2027.

This article reports a published stock pick and does not give personal financial advice. Check the company's own earnings release on Nov. 5 before you form a view.