In this article, I will explore the impressive FY25 growth of Micron and Applied Optoelectronics. These companies could extend during FY26 and beyond their bull run, due to their competitive advantages, AI expenditure tailwinds and their clear position in the complex value chain of advanced chip manufacturing.
Micron Technology, Inc. ( $MU)
Historic context
Micron is an American semiconductor company, focused on memory products. The company’s offering is split into 3 main categories: memory, storage and multichip packages solutions. For the past 50 years, the company has invested heavily in R&D, consistently prioritizing power efficiency and miniaturization across all of its product lines. In fact, its first product, a 64 kb DRAM chip, succeeded in the chaotic memory market from the ’80s due to its chip’s small form factor.
Current Outlook
Indeed, Micron’s strong focus on R&D investment has made it a leading competitor throughout its history. To be precise, in 2022 the company had around 50,000 patents which by 2025 increased by 20% to 60,000. Today, Micron is more relevant than ever, and stands ready to capture the AI buildout capex expected in the coming years. It is worth mentioning that only three companies in the world have the capacity to supply the critical fourth generation of HBM chips to Nvidia ($NVDA), Micron being one of them. Not only that, but its products also extend to the last generations of RAM and storage for data centers, which right now account for nearly 60% of its revenue.
Moreover, Micron is a vertically integrated semiconductor company that develops and manufactures its own products. Its manufacturing facilities are a result of multiple acquisitions and expansions. Currently, the company holds 13 sites, and plans to keep expanding its footprint in the U.S.
The chipmaker is strengthening its presence in Idaho with a high-volume manufacturing fab, expected to start operations in 2027. Additionally, Micron expects to invest around $100 billion in its ‘megafab’ facility in New York, to be operational in 2030. In summary, the Idaho-based firm’s competitive advantage relies on its R&D expenditure, top-notch technologies and its vertical integration.
Guidance
As a matter of fact, Micron had an outstanding start for FY26, its revenue, gross margin and EPS exceeded its guidance. For the first quarter, Micron reported $13.6 Billion in revenue, or 21% QoQ and 57% YoY. Memory represented 79% of it, storage 20% and the multichip packages solutions the remaining.
Even with the impressive results, Micron’s guidance suggests both the memory and storage markets to remain supply constrained until 2028. The company’s leadership plans to invest around $20 billion just in capex during 2026. These investments center around increasing its manufacturing capabilities and R&D divisions to ease the expected surge in demand for memory.
The data center business is right now the largest revenue source for the memory giant. Furthermore, Micron’s management expects even higher demand in computing due to newer trends in AI.
Macro trends
From my perspective, AI adoption is causing a snowball effect that promotes computing usage. Therefore, demand for compute resources, such as RAM, storage, CPUs and hardware accelerators, will continue to rise. Trends like agentic AI are quickly pushing the limits of current compute capabilities. This trend is present in open-source projects. For instance, ‘OpenRouter’ estimates worldwide usage at around 32 trillion tokens per month with a growth of 1600% YoY. Others companies extend that estimate to 50 trillion daily just in 2025. Moreover, it is indicated that the token consumption is accelerating as AI usage evolves; from merely asking questions to commands and decision making, also referred to as agentic AI.
Author’s opinion
For Micron, the agentic AI trend is especially relevant, as most of its products are required in the AI buildout. Products like its 6600 ION SSD series storage solutions are tailored for data center needs. In the same way, its HBM4 and SOCAMM2 memory modules are designed to meet both Nvidia’s Vera Rubin platform and several other AI accelerators’ requirements.
Additionally, diverse analysts expect the widening gap between supply and demand in the memory market to make low-end smartphone production economically unviable. In my opinion, this could increase flagship smartphone sales, in turn driving demand for higher-tier RAM modules, such as Micron’s LPDDR5X.
In summary, Micron stands to benefit from further growth, as increasing token usage drives demand for its memory and storage solutions. After all, without data there is no AI, and without memory there is no data. That is why I expect Micron to keep its heroic run.
Applied Optoelectronics, Inc. ($AAOI)
Context
Applied Optoelectronics (AOI) is a vertically integrated optoelectronics component supplier. In addition to its headquarters, wafer fab and engineering facilities in Texas, AOI has engineering and manufacturing facilities in Taipei, Taiwan and Ningbo, China.
Its business revolves around data centers, CATV and telecom infrastructure markets. However, with the recent AI expenditure cycle, the company is transitioning from a CATV-heavy business model toward a data center optics supplier.
Products
Applied Optoelectronics’s product lines focus on optical transceivers, co-packaged optics (CPO) and lasers.
These products are becoming more relevant as data centers prioritize power consumption and ramp up the speed in interconnections. Both requirements require moving away from traditional electronics and copper connections toward optical and photonics solutions, all of which are part of AOI’s portfolio.
What stands out the most, is its latest generation ultra-high bandwidth 1.6T transceiver. It enables the high-capacity interconnects required for hyperscaler infrastructure and large-scale model training.
Not only that, the company’s high-performance lasers are at the heart of the industry’s shift toward silicon photonics. AOI’s next-generation 400mW laser is expected to capture the demand for reliable external light sources in upcoming mission-critical GPU clusters and CPO applications.
Furthermore, in the last edition of OFC (Optical fiber communication conference) the company presented its next-generation optical product portfolio. Most of it targets data center applications. Such is the case for its newest 200G On-Board Optics product. In my opinion, this reflects the company’s optimism about the data center business.
Current financial results and future outlook
During FY25, AOI delivered strong growth, with revenue increasing 82.8% YoY at $455.7M. Data center revenue experienced a significant ramp-up, particularly in Q4, where it reached $74.9M, up from $32M in Q1. Although EPS improved significantly, it remained negative at -$0.01, making the company still unprofitable.
Moreover, the CATV business segment represented the largest revenue source at $245M while data center accounted for only $195M. Nonetheless, data center revenue is accelerating, as in the previous year it represented just $148M.
The company’s guidance expects an improvement in Q1 2026, with EPS reaching break-even. Likewise management has hinted a potential $4B+ revenue for FY27. If achieved, it would represent almost 1000% revenue growth, compared to FY25, positioning AOI as a major beneficiary of the AI infrastructure buildout.
As mentioned in its news release, AOI plans to expand its manufacturing capacity. AOI’s CEO mentioned the following: ‘The demand for optical connectivity in data centers has exceeded our expectations’. With the expansion, the company expects to increase its transceiver monthly capacity up to 700,000 units. Similarly, the company expects its laser capacity to increase by around 350% by the end of 2027. In summary, Applied Optoelectronics’ management expects continued growth.
Author’s opinion
In my opinion, Applied Optoelectronics stands to meet the optical requirements of the upcoming AI buildout, where energy efficiency and data center interconnection speed are critical priorities. The company benefits from several structural advantages, such as its vertical integration, multiple manufacturing facilities in the US, and strong exposure to data center optical components.
These could all serve as tailwinds for AOI’s growth in the near future. As mentioned earlier, the company is increasing its manufacturing capacity for this surge in demand. In turn, the company’s guidance expects annual revenue to increase tenfold by 2027. This is why I believe Applied Optoelectronic can still continue the current bull run.
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