We recently published a list of the 10 Best High Short Interest Stocks to Buy Now. In this article, we are going to take a look at where Lumentum Holdings Inc. (NASDAQ:LITE) stands against other high short interest stocks to buy now.

Aditya Bhave, BofA Securities head of US Economics, joined ‘Power Lunch’ on CNBC on April 17 to talk about whether tariffs are ultimately inflationary, disinflationary, or deflationary. Aditya Bhave responded that the impact depends on the magnitude of the uncertainty shock. He explained that tariffs are generally stagflationary, which means that they contribute to both inflation and economic stagnation. However, he also emphasized that it’s not just the content of the trade policy announcements that matters, but also the disruptive way in which these policies have been communicated, which has increased uncertainty for businesses. He noted that there is a scenario where the uncertainty caused by these policies could outweigh their stagflationary effects, making tariffs disinflationary instead. Bhave also referenced Fed Chair Jerome Powell’s recent hawkish remarks and drew a parallel to Powell’s stance during the 2021–2022 rate hiking cycle.

He highlighted Powell’s assertion that sustained full employment is not possible without price stability, which is a justification that Powell previously used for aggressive rate hikes even during a technical recession. Bhave believes the Fed is likely to maintain its focus on price stability and continue its current policy approach in the near term. Earlier during the COVID-19 pandemic, the Fed and Powell in particular, notably responded to tariff-induced supply chain disruptions by aggressively stimulating the economy. Bhave argued that this aggressive response came after and not during the initial supply chain disruptions, and that while the Fed may have acted a bit late, it ultimately raised rates sharply by 425 basis points in a single year. He does not expect the Fed to repeat such aggression, but believes that the case for holding rates steady is strong right now.

Our Methodology

We first sifted through stock screeners to find companies with a short interest between 10% and 25%. We then selected the 10 stocks that were the most shorted as of April 16, but at the same time were popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey’s database, which tracks the moves of over 1000 elite money managers.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

A close-up of a technician calibrating a laser beam.

Lumentum Holdings Inc. (NASDAQ:LITE)

Short % of Float As of April 16: 20.06%

Number of Hedge Fund Holders: 57

Lumentum Holdings Inc. (NASDAQ:LITE) manufactures and sells optical and photonic products. It operates through two segments: Cloud & Networking and Industrial Tech. It serves customers in semiconductor device, solar cell, display, EV, and battery manufacturing markets, along with broader materials processing and precision micromachining end-markets.

In FQ2 2025, the company’s Cloud and Networking segment generated $339.2 million in revenue, which was up 20% sequentially and 18% year-over-year. This segment is expanding because of a booming cloud market. Lumentum Holdings Inc.’s (NASDAQ:LITE) photonics innovations are essential for the high-speed, low-latency, and energy-efficient data transmission which is required in modern data centers, especially for AI applications.

Lumentum is a leader in Electro-absorption Modulated Lasers (EMLs), and in Q2, it achieved a record in EML unit shipments and began delivering new and more efficient 200G lane speed EMLs to multiple customers. This positions it to gain market share in next-gen 800G and 1.6T transceivers. On March 24, Raymond James analyst Simon Leopold upgraded the stock’s rating from Outperform to Strong Buy, while lowering its price target to $82 from $96.

Invesco Small Cap Value Fund stated the following regarding Lumentum Holdings Inc. (NASDAQ:LITE) in its Q4 2024 investor letter:

“Lumentum Holdings Inc. (NASDAQ:LITE): The telecommunications equipment maker reported better-than expected revenue and earnings for its recent quarter, along with record orders for its data communications laser chips used in data center applications.”

Overall, LITE ranks 5th on our list of the best high short interest stocks to buy now. While we acknowledge the growth potential of LITE, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than LITE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

Disclosure: None. This article is originally published at Insider Monkey.