Lumentum Holdings, the company that makes the optical plumbing for AI’s most power-hungry data centers, is getting a promotion. The photonics specialist will join the NASDAQ-100 Index on May 18, replacing CoStar Group, which was bumped due to its comparatively lower market capitalization.
Nasdaq made the announcement on May 8, and the market responded predictably. Lumentum shares gained 5.39% in pre-market trading, a modest encore for a stock that has already climbed more than 1,200% since early 2024.
The numbers behind the nod
Look at Lumentum’s trajectory. The stock rallied 339% in 2025 alone, propelled almost entirely by demand for optical components that power high-speed data transmission in AI and cloud computing infrastructure.
The company’s most recent earnings report, from April 25, backed up the hype with actual revenue. Lumentum posted $452 million in Q1 2026 revenue, an 18% increase year-over-year. That growth came from the two sectors every hardware maker wants exposure to right now: artificial intelligence and cloud computing.
CoStar Group, a commercial real estate analytics firm, drew the short straw in the NASDAQ-100’s periodic rebalancing. The index regularly swaps constituents based on market capitalization, and CoStar’s valuation simply could not keep pace with the AI-fueled surge lifting companies like Lumentum.
Why index inclusion matters more than you think
Every index fund and ETF that tracks the NASDAQ-100 must now purchase Lumentum shares to match the new composition. That forced buying creates real demand, regardless of whether any individual fund manager thinks the stock is fairly priced.
Analysts forecast a potential 10-15% short-term upside for LITE stock specifically because of these index fund inflows. That is on top of the 5.39% pre-market pop the stock already enjoyed after the announcement.
What this means for investors
The bull case for Lumentum is straightforward and compelling. AI infrastructure spending shows no signs of slowing, and optical networking sits at the physical layer of that buildout. An 18% year-over-year revenue increase is healthy, and the NASDAQ-100 inclusion should provide an additional tailwind through passive fund flows.
The bear case, though, deserves attention. Analysts have flagged the potential for overvaluation, particularly given the broader volatility in the tech sector. There is also a subtle risk in the index inclusion itself. The initial wave of passive buying can inflate a stock’s price beyond what fundamentals support, creating a setup for a correction once the mechanical flows subside.
For crypto-focused readers, the connection is indirect but worth noting. The same optical networking infrastructure that powers AI data centers also underpins the high-speed connectivity that large-scale blockchain operations, mining facilities, and decentralized computing networks rely on. Lumentum is not a crypto company, and no tokens or digital assets are tied to its NASDAQ-100 inclusion.
