What does Morgan Stanley's latest research report on June 29 think about the recent surge in Corning (GLW)?

Corning has risen about 40% in the past month, significantly outperforming most optical communication companies. Morgan Stanley believes that the company has indeed seen multiple positive catalysts recently, but the stock price has risen faster than the improvement in fundamentals, and market sentiment and short covering have amplified this round of gains.
Morgan Stanley believes there are four main drivers for the recent rally:
1. Fujikura raised its full-year performance guidance
Japanese Fujikura raised its full-year outlook, mainly benefiting from sustained improvement in optical fiber demand and prices.
The market has thus further strengthened its expectations for an upturn in the entire optical fiber industry chain, and Corning, as the global fiber leader, naturally becomes a beneficiary.
However, Morgan Stanley reminds that Corning has long adopted the LTA (Long-Term Agreement) model, so the transmission of fiber price increases to performance will take some time.
2. GlassBridge opens up new AI optical interconnection possibilities
Corning launched the GlassBridge platform, which can directly connect optical fibers to PICs (Photonic Integrated Chips).
As AI data centers gradually evolve towards CPO and NPO architectures, the importance of high-density optical fiber connections continues to increase. GlassBridge is expected to become a key solution for future optical interconnects, thus attracting many funds to refocus on Corning.
However, Morgan Stanley believes that this technology has been introduced by the company before, and the related opportunities have already been included in the approximately $10 billion Photonics market space proposed on Analyst Day.
3. NVIDIA long-haul optical network rumors
Recently, the market has heard that NVIDIA may be planning to build its own Long-haul Fiber Network, hoping to reduce its future reliance on cloud providers' network infrastructure.
If this direction is gradually implemented, it will further drive demand for long-haul fiber construction, creating new incremental opportunities for Corning.
However, Morgan Stanley believes that this is still at the market expectation stage and has limited contribution to short-term performance.
4. Short covering drives accelerated stock price gains
Previously, the market had been worried about the commercialization pace of CPO and industry supply issues, so GLW had accumulated a certain amount of short positions.
With a series of positive news recently, short sellers covered their positions in a concentrated manner, further amplifying the stock price gains. This is also one of the important reasons why its recent performance has significantly outperformed other optical communication companies.
Morgan Stanley's View
Morgan Stanley acknowledges that Corning will benefit from AI infrastructure construction in the long term, and also recognizes that the above catalysts are continuing to ferment.
However, they believe that the market has already priced in a lot of optimistic expectations. Before the Q2 earnings report, investor expectations are high. Once earnings or guidance do not further exceed expectations, stock price volatility may increase.
My View
This report seems more like a way to cool down the market after the recent sharp rise in stock price.
But I am still optimistic about Corning. I believe that AI infrastructure is still in a long-term construction phase, and data center demand for optical fibers, optical materials, and future glass substrates is expected to continue growing. GlassBridge also gives Corning greater imagination space in the next-generation optical interconnect architecture.