THE GLASS BACKBONE

(GLW), (LUMN), (T)

While cruising down Highway 1 last weekend, I received a call from an old friend who runs one of America's largest data centers. He sounded unusually animated, almost giddy. 

"John, you wouldn't believe what's happening with our fiber requirements," he said, nearly shouting over the roar of his Tesla. "We're ordering three times more optical cable than last year, and we still can't keep up with demand."

Why the sudden surge? Two letters: AI.

If you thought the AI revolution was just about software, think again. That intelligence needs a nervous system, and Corning Incorporated (GLW) is perfectly positioned to be the backbone supplier of that infrastructure. 

The numbers back this up. In Q4 2024, Corning's optical communications segment saw sales jump a stunning 93% year-over-year. Not a typo - ninety-three percent. This wasn't some fluke quarter either. 

For the full year, the segment grew 16%, pushing revenue to $4.66 billion and making it Corning's largest business by sales.

I've been following Corning since my days in Japan in the 1970s when they were pioneering fiber optics. Back then, the technology seemed almost magical - glass strands carrying phone calls. 

Today, these same glass threads (albeit vastly improved) are what's enabling AI to function at scale.

Let me break it down. Modern AI systems require absurd amounts of GPU computing power. These processors generate tremendous heat and need to communicate with each other at lightning speed. The faster the speed required, the more fiber connections you need. 

It's a perfect storm for Corning.

The company's management team clearly recognizes the opportunity. They've launched what they call their "Springboard Plan" targeting over $4 billion in revenue and 20% operating margins by 2026. 

The optical communication segment alone is projected to grow at a 30% CAGR through 2027. For context, the long-term average growth rate for the S&P 500 is 3%.

If you’re still not convinced, let's look at who's buying. 

Lumen (LUMN) recently inked a deal to have Corning supply 10% of its global fiber optics for the next two years. AT&T (T) signed a deal worth over $1 billion in late 2024. 

When telcos are throwing around billions, you know something significant is happening.

And Corning isn't just talking - they're innovating to meet the moment. In March, they launched their GlassWorks AI Solutions, which can dramatically increase data throughput. Their fiber enables 2-4 times more capacity in existing conduits. 

That's crucial because nobody wants to tear up streets to lay new pathways if they can avoid it.

What I find particularly attractive about Corning is that it's not a one-trick pony. Yes, optical communications is driving growth, but the company has diversified segments in display glass, life sciences, automotive, and specialty materials. These provide steady cash flow that can fund R&D and growth initiatives. 

In other words, Corning can place big bets on the AI revolution without betting the farm.

The latest earnings report confirms this financial strength. Q4 2024 sales jumped 18% year-over-year to $3.9 billion, but even more impressive was the EPS increase of 46% to $0.57. 

Profitability is accelerating faster than revenue - the holy grail for any corporation. Free cash flow hit $1.25 billion for 2024, up a hefty 42% from the previous year.

All this would be moot if the stock was outrageously expensive, but it's not. 

Corning trades at a forward P/E of 18.30x, slightly below the sector median of 19.04x and in line with the broader S&P 500 at around 18x. 

The forward PEG ratio of 1.12x represents a 21.46% discount to the sector median of 1.42x, suggesting the market hasn't fully priced in Corning's growth potential.

There are risks, of course. 

As a global supplier, Corning could face headwinds from President Trump's tariffs and ongoing US-China trade tensions. This could impact both demand for their products in China and the cost of raw materials. 

But with 170 years of business experience, Corning has weathered far worse storms.

I remember visiting Corning's headquarters in upstate New York back in the 1980s when I was covering technology for a major business magazine. What struck me was their combination of cutting-edge science with old-school manufacturing discipline. 

That culture persists today, and it's exactly what's needed to capitalize on the AI infrastructure boom.

So is Corning a worthwhile investment? At its current price, it offers an attractive risk/reward profile for long-term investors. I suggest you buy the dip.