COHERENT's stock plummeted 6.46% in pre-market trading on Tuesday, reflecting heightened volatility in the optical communication sector.

The decline is primarily driven by a bearish CPO (Co-Packaged Optics) research report published by SemiAnalysis, which argues that large-scale CPO commercial deployment faces significant delays until 2028-2029 due to core bottlenecks including low optical engine yield rates, high co-packaging integration difficulty, and unfavorable system-level cost economics. This report has intensified bull-bear divergence in the sector, leading to sector-wide selling pressure that has also dragged down peers such as Corning and Vishay Intertechnology.

Despite recent positive developments for COHERENT, including the groundbreaking ceremony for its Texas indium phosphide factory expansion attended by NVIDIA CEO Jensen Huang and confirmation of a $50 million CHIPS Act subsidy, the bearish research report has overshadowed these catalysts. NVIDIA had previously invested $2 billion in Coherent with a long-term supply agreement, but market sentiment remains cautious due to the CPO deployment concerns.