Why AAOI Stock Is Skyrocketing Today

Applied Optoelectronics (NASDAQ:AAOI) has surged by more than 9% today. Shares still remain down year-to-date but have almost doubled over the past year. President Trump’s Stargate Project announcement has lifted many stocks that are poised to benefit from artificial intelligence.

As a leading provider in the fiber-optic networking sector, it stands to benefit from data center investments. 

What happened?

President Trump’s recently announced $500 billion AI infrastructure investment is a rising tide that’s lifting all boats. Most stocks that can benefit from AI’s growth are up today. AAOI stock is no exception to the rule.

The $500 billion investment will increase the number of data centers, and each of those data centers will need fiber-optic networking. This foundation allows data centers to handle higher bandwidth, which helps with data storage. Fiber-optic networking also makes it easier for data centers to scale how much data they can manage.

So what?

Many corporations stand to benefit from increased AI investments, including fiber-optic networking providers like Applied Optoelectronics. It’s a case of a rising tide lifting all ships, but not all ships are worthy of the lift.

Applied Optoelectronics hasn’t posted impressive financials in recent quarters. The company’s revenue growth rate has been in the low-single-digits, and it continues to burn through money. The company generated $65.2 million in Q3 FY24, which was a small 4% year-over-year increase. Net losses almost doubled year-over-year, going from $9.0 million in Q3 FY23 to $17.8 million in Q3 FY24. 

AAOI stock has a $1.57 billion market cap while only generating approximately $149.1 million in the first three quarters of fiscal 2024. Even if the company reaches the high end of its guidance and delivers $104 million in Q4 FY24, that’s only $253.1 million in revenue against a $1.57 billion market cap. 

Applied Optoelectronics stock’s valuation leaves much to be desired. While Q4’s revenue projection presents solid growth, the overall trend has been low financial growth rates for AAOI. Even with the meaningful jump in revenue guidance, the company is still projected to lose money in the quarter.

While AI stocks enjoy a great catalyst, AAOI may end up underperforming the stock market.