Investing.com -- TD Cowen initiated coverage of the optical networking company Ciena (NYSE: CIEN) with a Buy rating and elevated it to one of its Top Picks, citing its strong positioning to benefit from the growing demand for AI infrastructure and datacenter connectivity.

The brokerage said Ciena stands out as a key beneficiary of the rapid buildout of AI networking, particularly in datacenter interconnect (DCI) and related optical transport technologies.

“We see Ciena as a key beneficiary of AI infrastructure demand and see its strong positioning in DCI as well complemented by its recent Nubis acquisition for intra-datacenter connectivity,” analysts led by Sean O’Loughlin said in a note.

“Ciena is exposed to each scaling domain and is insulated from many of the concerns we have in each. This clarity of Ciena’s bull case leads us to initiate with a Buy and add it to our Top Picks,” they added.

The analysts highlighted Ciena’s long heritage in optical technology as a key advantage. The company’s research-driven strategy and coherent optics leadership have enabled it to build a fully integrated fiber optics platform used by telecom operators and cloud providers. This technological differentiation supports stronger margins and long-term returns, the analysts said.

While historically focused on service providers, the company’s exposure to cloud operators has increased, with direct cloud-related revenue reaching about 32% in the most recent quarter. The analysts said demand from hyperscalers building transport networks is becoming an important driver of growth.

Another key element of the bullish thesis is the emerging “scale across” networking segment, which links multiple datacenters together to support massive AI workloads. TD Cowen described this opportunity as closely related to traditional DCI, an area where Ciena already holds strong market share.

The analysts also pointed to Ciena’s Nubis acquisition as opening new opportunities inside data centers, particularly as hyperscalers adopt new connectivity architectures for AI clusters.

“While Ciena is not unique in its exposure to all three scaling domains, what is unique is the greenfield nature of its opportunity,” the analysts wrote.

On valuation, TD Cowen noted the stock trades at a premium relative to its historical multiples. However, the analysts believe that “Ciena’s growth vectors are among the most durable in the group and believe its relative lack of idiosyncratic headwinds should afford it a premium multiple.”

“We initiate at Buy and make Ciena a Top Pick largely due to the ‘cleanliness’ of this story,” the analysts said, stressing the company remains “well positioned in every debate outcome outside of the AI infra cycle.”