Lumentum, Applied Materials outperform Nvidia in 2026 with gains of 121%, 67%

Two smaller chipmakers have outperformed Nvidia in 2026—Lumentum Holdings with 121% gains and Applied Materials with 67%—even as the AI giant limps to just 12% growth this year. The surge shows investors are betting on companies that supply the hidden infrastructure behind AI, not just the chips themselves. While Nvidia dominates the headlines, these firms are quietly profiting from the massive build-out of data centers that power AI systems.

Lumentum makes the lasers, transceivers, and optical components that let data race through data centers at lightning speed. Hyperscalers like Microsoft and Meta need those parts to reduce lag when crunching huge AI workloads. The company’s revenue nearly doubled in the first nine months of fiscal 2026, jumping 72% to $2 billion, and it expects another $985 million this quarter alone—more than double the year-ago period. Earnings per share have climbed 4.5 times, showing the business is moving from high growth to high profit.

Analysts say demand for optical gear will keep rising at a 21% annual clip through 2029, swelling the market to $30 billion. Lumentum’s components solve a real bottleneck: AI chips sitting idle while waiting for data now get fed faster, shortening the time it takes to train models. That efficiency is worth real money, and the company’s higher-margin data center products are improving its bottom line.

Applied Materials, meanwhile, supplies the machines that etch and package semiconductor wafers—critical gear for every chipmaker, including Nvidia. Its 67% gain reflects bets that global fab capacity will keep expanding to meet AI’s insatiable appetite for compute. Both stocks suggest the next wave of AI riches may flow to the suppliers, not just the headline names.