Corning (GLW.US) receives initial "Buy" rating from Jefferies! AI factories driving a fiber optic rush, with a potential global supply gap of up to 30%

Wall Street financial giant Jefferies has announced its first coverage of Corning (GLW.US), a leader in AI data center fiber and optical connectivity solutions, assigning it a “Buy” rating—the most optimistic bullish rating—and a bullish price target of $134, which drove Corning's stock to surge by 7.43% to $120.460 at Wednesday's US market close.

According to Jefferies' senior analyst Dushyant Ailani, the core logic behind initiating coverage on Corning is that by 2026, there will be a massive global fiber supply gap, approximately equal to 30% of demand, and this shortage is expected to persist in the long term. The scarcity is highly beneficial for Corning to secure multi-year orders and fill new fiber capacity with higher-value, higher-density integrated products.

The institution’s latest estimates suggest that starting in 2028, Corning’s photonics business will ramp up, bringing incremental opportunities of about $10 billion by 2030. Based on its valuation framework, Corning’s FY2 EV/EBITDA has dropped from the summer high of about 32x to 14x, starting to offer value for bottom-fishing investors. Jefferies is optimistic about this attractive entry window, based on the fact that the existing optical communications business is already delivering profits, while internal optical connectivity in devices still has room to grow as production platforms scale up.

For Corning, the current profit increase is driven by AI cluster expansion. As more inter-cabinet and inter-campus links are created, customers need to lay more fiber within limited conduit and cabinet space, giving Corning more opportunities to enhance the value of each link supplied through high-density optical cable lines, pre-terminated assemblies, and high-speed optical connectivity systems. Multi-year procurement commitments also make post-expansion sales more predictable. This logic has already played out in the third quarter, with optical communications revenue increasing 44% year-over-year and divisional net profit up 80%.

In addition, Corning’s next wave of growth comes from co-packaged optics (CPO), which brings optoelectronic conversion closer to the chip, and from the gradual adoption of optical connections in GPU scale-up networks. The former allows Corning to penetrate internal device precision optical paths, while the latter increases the amount of optical connections required per GPU. Jefferies expects the photonics business to accelerate from 2028 and bring about $10 billion in incremental revenue opportunity by 2030.

From Glass Manufacturer to AI Optical Interconnect Infrastructure Supplier

Jefferies analyst Dushyant Ailani initiated coverage on Corning with a “Buy” rating and a $134 price target. He wrote in a research note to clients: “Corning is a materials science company based on glass, ceramics, and optical physics. It has transformed from a diversified glass manufacturer whose performance was closely tied to consumer electronics and the display market into an investment target in the field of AI optical infrastructure, resulting in a significant re-rating in market valuation.”

“We expect the current global fiber supply shortage to persist, with a shortfall equivalent to about 30% of 2026 demand. This will benefit Corning, improving demand visibility, strengthening customers’ multi-year procurement commitments, and enabling the company to use its additional capacity to produce higher-value, higher-density integrated products.” analyst Ailani wrote.

For the future long-term growth outlook of Corning’s next-generation optical product line, the analyst said: In the long run, from 2028, ramping up the photonics business will provide additional growth opportunities. We estimate that by 2030, this opportunity will reach $10 billion, about 25% of projected 2030 revenue. Corning’s valuation temporarily reached about 32x FY2 EBITDA this summer before falling back to around 14x, still significantly higher than the high single-digit multiples from 2021 to 2024. Although the stock has recently rebounded, it remains close to recent lows. As AI data centers’ demand for optical connections grows, we believe the company—which is well positioned to benefit—still offers an attractive entry opportunity.”

Besides Jefferies, several other Wall Street giants have recently issued bullish reports on Corning as its share price sharply declined due to concerns about the stalling of data center construction after the Democratic Party’s sweeping victory in the US midterm elections, the heavy pressure of AI financing costs, and the recent AI de-leveraging storm. Using the same closing price as a benchmark, UBS maintained its “Buy” rating but lowered the target price from $201 to $192, implying a 59.4% upside, and raised earnings per share forecasts for the next three years, optimistic about internal cluster optical interconnect ramp-up and profit margin improvement.

Another Wall Street giant, Citi, also maintained its “Buy” rating, lowering the target price from $220 to $200, implying a potential upside of 66.0%; the institution believes optical communications outperformed expectations, but solar climbed slowly and industry valuations retreated. Truist also maintained its “Buy” rating, with a target price of $175, implying a 45.3% upside, and significantly raised earnings forecasts due to growth in optical communications and new contracts in optical business lines. The common theme in these bullish judgments is that the earnings outlook for Corning’s optical communications business, which is closely tied to data center construction, is improving, and price targets still depend on the scale-up timing of product lines and the valuation multiples the market is willing to apply.

Corning’s Two Phases of “Optical Growth”: Fiber Networks Expanding, Optical Paths Extending to Chips

For Corning, the recent profit uptick mainly comes from AI cluster expansion. As more inter-cabinet and inter-campus optical links are added, customers need to lay more optical fiber within limited conduit and cabinet spaces, increasing the demand for high-density optical cables and connectivity systems.

More importantly, as a leader in AI data center fiber and optical connectivity solutions, Corning is benefiting from large-scale data center optical network expansion across cabinets and campuses, and is extending its supply reach to the most advanced and precise internal optical paths near chips through co-packaged optics (CPO).

Corning’s two milestone growth opportunities come from wider network rollout and closer-to-chip optical connections. The first phase: As AI clusters grow, more inter-cabinet and inter-campus optical links mean Corning sells more high-density optical cables, connectors, and cabling systems. The second phase: As optoelectronic conversion moves from the device front panel toward the switching chip, Corning can extend its supply scope to internal device precision optical paths. The greater incremental potential arises as GPU scale-up networks begin to use optics, increasing the amount of high-speed optical connections per GPU.

Inter-cabinet demand arises from GPUs needing to exchange data frequently. Large model training requires synchronizing gradients and transferring intermediate results among GPUs, and Mixture of Experts (MoE) models need to dispatch different tokens to designated experts. If communication can’t keep up, expensive GPUs will wait for data. As clusters expand from dozens to hundreds of cabinets, scale-out networks connect compute nodes via Ethernet or InfiniBand. More nodes increase access ports and upstream links, and further cluster expansion may introduce additional switching layers. Corning can thus supply cabinet jumpers, pre-terminated assemblies, high-fiber-count backbone fibers, and cabling systems, covering multiple connection links within a single link.

Inter-campus demand comes from constraints on power and construction conditions for compute placement. When a single campus cannot meet requirements for grid capacity, land, and server space, operators distribute capacity across multiple sites and connect them via Data Center Interconnects (DCI). Inter-campus transmission increases cable mileage and demands greater conduit capacity and deployment speed. This is where the value of Corning’s high-density products lies: more fiber cores fit in the same conduit, allowing customers to expand over existing routes and reduce costs for re-digging and re-cabling. Meanwhile, wavelength-division multiplexing (WDM) and multi-core fiber boost transmission capacity per fiber, so Corning’s revenue elasticity depends on the number of new links, cabling density, and the component value per link. Simply judging by port speed may overestimate fiber core demand.

This growth has already appeared in the financial statements. In Q3 2026, Corning’s optical communications revenue reached $2.379 billion, up 44% year-on-year, and the segment’s net profit jumped 80% to $532 million, with segment net margin increasing from around 17.9% to 22.4%. Enterprise network sales grew 84%, and generative AI-related product sales grew by over 100%. Management also pointed out that increased capacity, higher realized prices, and high-value products collectively drove revenue growth. Meta’s multi-year supply agreements worth up to $6 billion also cover fiber, optical cable, and connectivity products, indicating that major clients are securing complete cabling supply capabilities.

The second phase is that as optoelectronic conversion moves closer to the chip, Corning begins supplying precision internal optical paths for equipment. Co-packaged optics (CPO) integrates the optical engine and switch chip in a single package, while near-packaged optics (NPO) uses independent packages to place the optical engine near the chip. Both shorten high-speed electrical paths. With cabinet power and cooling budgets fixed, lowering per-bit interconnect power consumption frees up more power and cooling capacity for compute equipment. Nvidia has already used this approach in its Spectrum-X Ethernet Photonics switch, which primarily serves scale-out and inter-campus networks.

Corning’s new supply segment is to deliver light precisely from the device front panel to the photonic integrated circuit (PIC). The optical engine handles electrical-optical conversion, while Corning supplies the passive components along the path, including high-density panel connectors, bend-insensitive fibers for tight spaces, pre-loaded fiber trays, and fiber array units (FAU) that precisely align multiple fibers with the chip’s optical interface.

Taking GlassBridge as an example, Corning integrates precision waveguides into glass to produce detachable optical interfaces. The value here comes from assembly precision and mass production capabilities: numerous optical channels must simultaneously meet requirements for insertion loss, bend radius, alignment accuracy, and reliability in compact spaces. Being able to co-design, pre-install, and test these components to customer chassis specifications gives Corning the chance to boost the supply value per device.

The greater volume elasticity comes from vertical scaling (Scale-up), where more GPUs work together in the same low-latency, high-bandwidth domain. Nvidia’s Vera Rubin NVL72 cabinet still uses around 5,000 copper cables for NVLink, with short copper connections having a mature engineering base.In the planned Rubin Ultra NVL576, Nvidia will place eight cabinets within the same 576-GPU NVLink domain, combining copper connections and direct optical links. CPO and NPO determine where optoelectronic conversion occurs, while scale-up optics determines how many links previously handled by copper will shift to optics. The latter directly relates to how much incremental optical connectivity demand Corning receives per GPU.

Corning’s Investor Day illustrated this difference very clearly. In its Rubin Ultra reference architecture, each GPU corresponds to about 16 fibers in the all-optical scale-out scenario. With scale-up links—assuming a 200 Gb/s per channel plan with one fiber for transmit and one for receive—opticalization would add 144 more, totaling about 160. This is the all-optical scenario under the designated architecture. Corning estimates 2028 optical connectivity use per GPU to be 1.3 to 1.5 times the current level, and sees the $10 billion by 2030 as the potential revenue opportunity for its photonics business.