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Applied Optoelectronics plunges 46.3% in three months as supply constraints and a rich valuation offset surging AI-driven demand for 800G and 1.6T products.
AI datacenter spending has turned optical networking into one of 2026's hottest trades, but the three biggest U.S. optics stocks have performed so differently that picking the wrong one meant leaving triple-digit gains on the table.
Many AI-related stocks have seen major volatility in 2026, with several high-flying names pulling back sharply after huge runs earlier in the year.
When investors think about artificial intelligence, NVIDIA usually steals the spotlight. But the AI boom extends far beyond GPUs, creating opportunities across data preparation, networking, and infrastructure.
The AI optical connectivity trade is cooling this Friday afternoon, with the same names that led August higher pulling back in unison.
ASML's stronger price performance, favorable valuation and rising earnings estimates give it the edge over AAOI in this tech-stock faceoff.
Applied Optoelectronics 800G revenues surge more than tenfold year over year as demand outpaces supply and capacity expansion targets further growth through mid-2027.
Applied Optoelectronics is positioned to benefit from the data center industry's shift to high-bandwidth optical transceivers, driven by AI infrastructure demand. I initiate AAOI with a 'Strong Buy' rating, citing robust demand, aggressive capacity expansion, and a roadmap aligned with 800G/1.6T/3.2T industry transitions. AAOI's valuation is compelling, with price-to-sales multiples compressing rapidly as revenue ramps, though heavy dilution from equity issuance is a key risk.