Serenity spent Thursday digesting the quarterly earnings call from Coherent (COHR) — the vertically integrated photonics group that makes optical substrates, lasers, transceivers and silicon carbide, and one of the clearest beneficiaries of the AI-driven optical interconnect buildout. He holds it, sized at roughly 2.5% of his book, treating it as a steadier, lower-beta anchor against his more speculative upstream bets. His read of the transcript was that the fundamentals of the optical names keep improving even as their share prices sell off — a gap he clearly finds striking.

Several points stood out to him. Management, he noted, pushed back hard on the idea that the laser industry faces oversupply by 2028: Coherent is consuming its entire internal production of InP (indium phosphide, the compound semiconductor used for high-speed lasers) in its own products while it expands capacity. He also flagged commentary casting doubt on Chinese competitors' ability to supply high-end lasers for CPO — co-packaged optics, where the optical engine sits next to the switch or GPU die to save power and lift bandwidth.

The detail that most fits his framework: Coherent described a new roughly $20 billion, five-year long-term agreement anchored by high-power CW lasers — the continuous-wave light sources that feed silicon-photonics and CPO, as opposed to the EML lasers used in pluggable 800G/1.6T links. Serenity's takeaway was that CW is emerging as the technology of choice for CPO scale-out and scale-up through 2027, with micro-VCSELs further out for chip-to-chip links around 2029-2030. That matters because the light source is precisely the kind of upstream chokepoint — a critical supplier with few substitutes — that sits at the center of his investing thesis.

He also drew attention to how these contracts get funded. The long-term agreements carry customer prepayments, which Coherent uses to place capacity orders — meaning the expansion is financed by committed revenue rather than fresh capital raised into a jittery market. In his telling, that insulates the optical names from financing fears during the current selloff.

Two names came up as Coherent's apparent rivals. Lumentum (LITE) — which Serenity owns at about a 5% weight and treats as the quality large-cap incumbent of the photonics space, tied to Google TPU optics — was the company he read into Coherent's remark that it has "really only one competitor" in high-power CW lasers for CPO. He uses Lumentum as the benchmark against which he pitches his higher-upside small-caps. He also touched on Marvell (MRVL), the custom-ASIC and optical player he holds as a mega-cap satellite, in the context of its combination with Lumentum; Coherent's management suggested customers may prefer an independent optical supplier free of competitive conflicts, which Serenity framed as an opening for merchant laser suppliers.

His broader conclusion was that optical demand looks more durable than the market is pricing. He emphasized Coherent's point that converting copper interconnects to optics is driven by bandwidth needs independent of raw compute growth — so even a data-center slowdown could coexist with rising optical content per system. With pricing power supporting higher margin targets across the group, his view is that the optical players are getting fundamentally better while valuations crash — a disconnect he clearly sees as opportunity rather than warning.