On July 21, 2026, the US stock AI hardware sector saw a rebound wave. The optical communications sector surged across the board. The Pure Photonic ETF (FOTO) jumped more than 9% in a single day; among its constituent stocks, Coherent rose more than 11%, Lumentum rose more than 9%, and Ciena rose nearly 8%. This rebound is the result of a three-way resonance between fundamental drivers, fund rotation, and sentiment repair.

📈 Who is FOTO? The tool with the highest “purity” in photonics

FOTO’s full name is the Tuttle Capital Pure Play Photonics ETF. It was only listed on May 29 this year, with a size of about $139 million. It uses an active stock-picking strategy, investing only in companies whose revenue is mainly derived from photonics. It covers fields such as lasers, optical transceiver modules, and silicon photonics. It is currently one of the highest-purity ETF tools for photonics in US stocks.

🔥 The three biggest drivers of the rally

1. Pricing for the 1.6T optical module upgrade cycle

The market is pricing the 1.6T optical module upgrade cycle needed for AI cluster construction in the second half of the year. Global cloud providers and AI companies continue to raise their budget for computing power infrastructure investment. 1.6T products have entered the mass delivery cycle. In this round of gains, Mavenir Technology—specifically mentioned by Jensen Huang—lagged behind some “pure” optical module manufacturers (up more than 6%), suggesting that funds are shifting from the broad “NVIDIA concept” toward more bottleneck-driven subsegments within the optical communications industry chain.

2. Overall fund inflow returning to chip stocks

This is not an isolated move. Ahead of the July 21 open, the top six optical communications stocks all rose in sync, forming a linkage with the Philadelphia Semiconductor Index’s surge of 5.21%. This belongs to the rotation driven by an overall return of funds to chip stocks, not a single positive catalyst.

3. Sentiment repair after extreme oversold conditions

Previously, the optical communications sector experienced a sharp pullback, with some individual stocks nearly “cut in half.” UBS data shows that hedge funds have reduced momentum-stock and semiconductor-stock long positions by about 5% of total market value, setting a historical record. After extreme overselling, buy-the-dip demand and short-covering formed a combined force.

In this round of explosive gains for optical communications, the essence is a rebound from oversold conditions resonating with industry logic—your fundamental narrative for the 1.6T upgrade has not been broken, and after the market stabilizes, funds prioritize returning to the core main line with higher recognizability. But concerns also remain: ongoing geopolitical disturbances in the Middle East, and Tesla and Google are set to release earnings reports. The market still questions whether AI’s massive capital expenditures can generate sufficient returns. Whether optical communications can sustain its “king’s return” depends on whether the earnings season can validate the real returns of computing power investments. #夏日创作营