Investing.com -- Applied Optoelectronics (NASDAQ: AAOI) shares jumped 9%, Lumentum (NASDAQ: LITE) rose 7%, Coherent (NASDAQ: COHR) gained 2.3%, and Viavi Solutions (NASDAQ: VIAV) gained 1% in pre-open trading Wednedsday as companies presented at the Optical Fiber Communication Conference (OFC) and discussed strong AI demand.

The rally followed positive commentary from the conference, where companies outlined growth opportunities in optical interconnect solutions. Earlier in the week, Nvidia CEO Jensen Huang highlighted the need for increased-capacity optical interconnect solutions, though he noted copper connections will also see heavy demand.

Rosenblatt analyst Mike Genovese commented that a bullish presentation from Lumentum and thoughtful presentations from other companies made day one of OFC positive. The analyst noted that scale-up co-packaged optics (CPO) starts in 2028 at 400G per lane or 3.2T and represents a significant content gain opportunity for optical companies.

Genovese said indium phosphide lasers are sold out through 2027 and into 2028, driven by transceiver demand and some scale-out CPO. Companies including Lumentum and Coherent are building new capacity for scale-up CPO, suggesting the AI infrastructure expansion cycle could continue until the end of the decade.

Coherent said optical circuit switching, next-generation pluggable optics/CPO, multi-rail, and thermal solutions add over $20 billion in serviceable addressable market to its existing $50 billion SAM. The company sized its CPO SAM as over $15 billion in 2030.

Applied Optoelectronics announced plans to include 300mw/400mn External Laser Small Form-Factor Pluggable modules for CPO in its capacity ramp plan. The company said it will produce 5,000 units per month of ELSFP exiting 2026, growing to 50,000 units per month by mid-2027 and 400,000 units per month exiting 2027.