2 Photonics Stocks to Buy as Markets Hit Oversold Conditions

Markets are under extreme pressure.

It won’t last forever…make it an opportunity.

Here are 2 photonics stocks to buy as markets hit oversold conditions.

Every couple of years, traders get extremely fearful…which offers up a rare buy the dip window.

That’s the situation today as our Big Money Index (BMI) has reached the oversold zone.

This indicator is a moving average, tracking equity inflows vs outflows. Only when sellers massively outnumber buyers, can we reach the green zone.

Below shows the oversold conditions and prior instances of capitulation.

Also, I’ve included forward returns for the S&P 500 and NASDAQ 100 from the 1^st day the BMI triggers oversold.

Note how 6 and 12 months later, major indices have a very high likelihood of double-digit returns. Since 2014,  the S&P 500 gained an average of 14.5% and the NASDAQ 100 climbed 17% post a dip into the green zone.

Notable prior oversold periods include October 2023, the inflation-wreck of 2022, and COVID-19 of March 2020:

While market conditions are painful to sit through, as investors we need to keep focused and not react emotionally.

The better idea is to look for high-quality stocks offering a compelling entry point.

The photonics space is a core theme of the AI trade. It is centered around using light to send electrical information.

As AI data center buildouts explode, betting on top-rated names is a smart play.

Today, we’ll unpack 2 optical opportunities with years of runway ahead.

And when the BMI finally starts to climb, odds are that all tides will rise…especially the beaten down AI trade.

2 Photonics Stocks to Buy as Markets Hit Oversold Conditions

Hyperscale data centers require tons of speed.

Optical transceivers take electrical information and use a semiconductor laser to encode it onto light.

Our first top photonics stock to own in an oversold market is Lumentum (LITE). The $95 billion market cap player helps turn electrical data into light.

They specialize in optical components.

The stock has fallen hard, dropping 14% the last week. The forward P/E has also sunk to 35.1 times:

One major reason to be constructive on LITE is the recent commentary from the CEO. He noted how the company is completely sold out of optical components for AI servers through early 2029.

That’s the kind of information investors should heed.

When you couple those bullish comments with the forward EPS trend from Wall Street analysts, the opportunity shines bright.

Here we can see FY 2027 EPS is estimated to reach $21.70 and catapult to over $47 in FY 2029.

With the earnings picture illuminous, let’s check on the flows.

Here we can see lots of green signals elevating LITE shares for most of 2026. And there’s a lone Outlier signal (blue) highlighting a top-ranking in our process.

All great stocks have institutional support over the long run.

Once the market selloff subsides, I expect prior leading stocks to surge again.

Let’s do another.

Our 2^nd top photonics stock to own in an oversold market is Tower Semiconductor (TSEM).  The $24 billion market cap player provides manufacturing processes for the semiconductor industry.

Given the smaller size, expect this name to be more volatile.

The stock has fallen hard, dropping 8% the past week. The valuation has been cut in half from months ago with the forward price to earnings ratio reading 33.7 times:

And EPS estimates continue to climb with FY 2026 slated to reach $3.89 and jump to over $10 in FY 2028:

With projections like this, it should come as no surprise that the flow picture has been healthy.

TSEM shares have enjoyed plenty of inflows in 2026.

I expect that to resume once markets firm up:

Follow the earnings. And follow the flows.

Oversold markets rarely last forever.

Looking back historically, they’ve been a great time to sharpen your pencil and bet on top names being unfairly punished.

MoneyFlows helps you spot all-star stocks early that most investors miss.

Once the BMI starts to head higher – that’s the GO signal.

We believe it’ll be here sooner than most expect.

The backlog for AI will last years. Now is a great time to get thematic exposure in the best stocks…validated by the MoneyFlows process.

Our PRO (Annual) subscription now includes access to all 11 Frontiers, and their outlier baskets.

Save time with market-beating research in the biggest frontiers.

It’s our biggest enhancement of the year.

AND get access to our daily flows in our cutting-edge portal.

Also included is our weekly Outlier 20 report and monthly Frontiers 20 report.

Make the most of the midterm selloff!

AND don’t miss my deep dive conversation with Jason Bodner on 3 top photonics stocks to consider during oversold conditions.

You can learn our process. Enjoy!