The hedge fund manager expressed skepticism toward Lumentum Holdings (LUMN), advocating a sell stance due to intensifying competition and declining gross margins. The comment follows a broader tech sector reassessment amid shifting demand for optical components.
- Lumentum’s gross margin fell to 53.1% in Q4 2025, down from 58.9% YoY
- LUMN revenue from data center infrastructure declined 11% YoY in Q4 2025
- Jim Cramer advised selling LUMN, citing competitive threats from NVDA and AVGO
- After Cramer’s comment, LUMN stock dropped 4.2% in after-hours trading on March 3, 2026
- LUMN trading below its 50-day moving average amid sector-wide reassessment
- Vertical integration by NVDA and AVGO is reducing reliance on third-party optical suppliers
Jim Cramer, prominent financial commentator, declared he would avoid buying Lumentum Holdings (LUMN) and instead recommend selling the stock. His assessment centers on deteriorating profitability and rising competitive threats in the optical communications segment. Cramer pointed to Lumentum’s gross margin contraction to 53.1% in Q4 2025, down from 58.9% in the same period a year earlier, signaling margin pressure from price competition and inventory adjustments. The semiconductor and optical component producer faces headwinds from both Nvidia (NVDA) and Broadcom (AVGO), which are vertically integrating their own optical subsystems. This trend reduces reliance on third-party suppliers like Lumentum. Cramer highlighted that LUMN’s revenue from data center infrastructure, a key growth driver, declined 11% year-over-year in Q4 2025, underscoring weakening demand amid server inventory corrections. Market reaction followed Cramer’s remarks, with LUMN shares dropping 4.2% in after-hours trading on March 3, 2026. The stock has since traded below its 50-day moving average, reflecting broader investor caution. Sector peers including AVGO and NVDA saw modest intraday fluctuations, but no significant capital shifts were observed. This commentary underscores a broader concern: while Lumentum remains a key supplier for AI infrastructure, its standalone value proposition is under scrutiny. Institutional investors are reassessing the long-term sustainability of its margin profile and market differentiation, particularly as integrated solutions become more prevalent.