Lumentum Holdings Inc. (LITE) stock rose about 9% Thursday, outperforming the broader market. The Nasdaq is up 0.36%, while the S&P 500 has gained 0.13%.

Coherent Corp. (COHR) also advanced after reports pointed to possible U.S. restrictions on Chinese optical transceivers. The devices move data over fiber-optic networks and are critical components in artificial intelligence data centers.

Analyst Sees Potential Tailwind

Shay Boloor, chief market strategist at Futurum Equities, wrote on X Thursday that Lumentum and Coherent had both posted sharp gains. He said the reported restrictions appear focused on 3.2T transceivers and would not affect the current 800G and 1.6T data-center buildout.

In his post, Boloor noted that a roughly 65% U.S. content workaround could shift more of the next optics cycle toward domestic suppliers.

A Morgan Stanley client note circulating Thursday, which MarketDash has not independently verified, also pointed to 3.2T as the most likely starting point for potential restrictions. The note said any limits would likely be phased in.

Such a move could keep laser-component supply tight and support demand for Lumentum and Coherent.

Meanwhile, Bernstein initiated coverage of Lumentum on Wednesday with an Outperform rating and a $1,220 price forecast.

Washington Scrutiny Builds

Reuters reported Saturday that a bipartisan group of U.S. lawmakers introduced legislation Friday that would prohibit the federal government from using Chinese-made optical transceivers in sensitive systems.

The bill targets products from China's Eoptolink and Zhongji Innolight. Republican Sens. John Cornyn and Dave McCormick, along with Democratic Sens. John Fetterman and Ruben Gallego, sponsored the measure.

The Information Technology Industry Council previously urged the Federal Communications Commission not to add optical transceivers to a trade blacklist.

Still, replacing Chinese suppliers could prove difficult in the near term. A Foundation for American Innovation report said Coherent and Lumentum may not currently have enough production capacity to fully offset Chinese supply, according to Reuters.

Price Action: Coherent shares were up 11.00% at $319.48 and Lumentum Holdings shares were up 7.74% at $1046.39 at the time of publication on Thursday, according to market data.