Nvidia just made another couple of brilliant bets on AI

• Nvidia (NVDA) invested $4 billion in Lumentum (LITE), a laser company, and Coherent (COHR), a maker of optical transceivers.

• Nvidia targets AI infrastructure bottlenecks as industry moves from copper wire to silicon photonics.

• The analyst who called NVIDIA in 2010 just named his top 10 AI stocks. Get them here for FREE.

Just when you thought NVIDIA (NASDAQ:NVDA) and its legendary founder and CEO Jensen Huang is getting its fill of interesting AI deals, the GPU titan makes another pair of moves. To be sure, all the investments in the AI ​​scene could be making some shareholders uneasy, especially as circularity introduces a more complicated web of risks over time.

Does each deal increase the weight on the shoulders of the AI ​​giants? Or is it simply a way to save both parties a lot of money while working together to solve some of the world’s toughest problems?

Could the deal act as an accelerator for broader adoption across industries as AI companies target new vertical markets? Or will they only raise the bar of expectations even higher, inevitably making AI dealmakers even more disappointed once it becomes clearer that the investment returns are not there, at least for a period of time that is acceptable to the average trader?

READ: The analyst who called NVIDIA in 2010 just named its top 10 AI stocks

Either way, I think the AI ​​boom is alive and well, but now that much of the short-term hype is fading, the big question is whether the long-term trajectory is still there and whether it makes sense for investors to hit the buy button now that the short term is somewhat less hyped while the long term is as exciting as ever.

While investors may have become accustomed to and perhaps bored with large language models (LLMs), I believe there are still many “ChatGPT moments” (like the ones Jensen Huang sees coming as physical AI takes shape) ahead.

Even as companies take some pains to avoid feeling like they’re imposing AI on users who aren’t ready or willing to adopt it for everyday workflows, I think the technology will evolve to a point where users will turn to AI, rather than having it delivered to them intrusively embedded in the side of a browser or something.

In any case, Nvidia is playing the “pick and shovel” game that wants to help companies position themselves in such a way that users choose to adopt (and hopefully pay for) the latest and greatest AI subscriptions. And, in that sense, I hope Nvidia continues to do business (big and small) while spreading its wings across industries and even geographies.

The latest pair of bets made by Nvidia may seem less notable, especially compared to the ongoing deals the company has made in recent months. Still, as Nvidia appears to be betting big not only on AI inference but also on infrastructure, as AI innovators look to overcome notable obstacles, I think it’s about time to start being bullish on Nvidia stock again.

In case you missed it, the GPU giant invested $4 billion (a pretty small amount by Nvidia standards!) into photonics innovators. lument (NASDAQ: LITE) and Consistent (NASDAQ:COHR). As the industry shifts from copper wire to silicon photonics (think optical cable), the two companies stand out as critical infrastructure providers that could help remove more obstacles standing in the way of faster AI advancement. Lumentum is a high-power laser player, while Coherent is the optical transceiver.

While the pair of high-tech innovators holds tremendous promise for growth as AI infrastructure evolves to become faster and more efficient, I’m not at all comfortable chasing either name given their recent strength. They are too hot to handle here, especially now that the tech trade loses a bit of steam.

In any case, the pair of deals could not only be a great investment, but could also help the AI ​​revolution advance at a faster pace. Either way, the bet seems smart, but it comes with a pretty high entry price. LITE and COHR stock have gone parabolic over the past year, and that’s sure to raise concerns that such deals are adding more air to an AI bubble.

Wall Street is investing billions in AI, but most investors are buying the wrong stocks. The analyst who first identified NVIDIA as a buyback in 2010, before its 28,000% run, just identified 10 AI startups that he thinks could generate huge returns from here. One dominates an equipment market valued at $100 billion. Another is solving the biggest bottleneck holding back AI data centers. A third is a pure play in an optical networking market that will quadruple. Most investors haven’t heard of half of these names. Get the free list of 10 stocks here.