While AI applications dominate the conversation, a less-visible hardware trend is already delivering results. Key photonics companies are posting strong earnings, validating the theme for investors in AI and robotics and automation ETFs.
Investors in 2025 are focused on the transformative power of AI, robotics, and industrial automation. However, as these technologies scale, they are running into a critical bottleneck: energy and heat.
Traditional data centers, built on copper wiring, move data using electricity. This process wastes enormous amounts of energy as heat, as well as creates a limit as to how fast data can be transferred. For power-hungry applications like AI, this is a major headwind.
This is where photonics, the science of using light (photons) to transmit data, can offer efficiency gains. By replacing legacy wiring with optical interconnects and fiber optics, data can move at the speed of light with virtually no heat generation.
As photonics scales in areas like data centers, the impact for performance per watt is significant. In short, photonics allows for an enormous leap in efficiency, transmitting more data, faster, with far less energy consumption.
A ‘Picks & Shovels’ Play on AI & Robotics
This creates a “picks and shovels” opportunity. Instead of betting on which AI model will win, investors can focus on the essential hardware companies that all AI and automation platforms will need to function.
Companies like Lumentum (LITE), Jenoptik (JEN GR), and Coherent (COHR) manufacture the essential lasers, sensors, and optical components that form the backbone of this new infrastructure. These names have recently posted strong earnings.
For investors, this trend is a core component of two major themes:
- Artificial Intelligence: The ROBO Global Artificial Intelligence ETF (THNQ) captures the AI-specific angle. Lumentum, a leader in optical and photonic components for data centers, is a top five holding. As AI demands faster, more efficient data centers, the companies held in THNQ that facilitate this “performance per watt” revolution will continue to benefit.
- Robotics & Automation: Photonics are essential for the high-speed sensors and data communication required by modern robotics. Jenoptik and Coherent are holdings in the ROBO Global Robotics and Automation Index ETF (ROBO).
