Damnang
Semiconductor Engineer in Silicon Valley, AI Chip Investment Research
Applied Optoelectronics still offers a lot of opportunity after falling 37% from its May 13 peak of $233.67 to around $147. It has posted record revenue for four straight quarters, though it is still losing money, with a 29.1% GAAP gross margin and a 21x sales valuation. The drop follows a 550%+ run over the past year, so the key question is whether it is a cooled-off pullback worth buying or an early bubble deflating. x.comÂ
Applied Optoelectronics has a better chance than Coherent of delivering a 300-400 mW laser with tolerable RIN and linewidth. Its transceiver capacity ramp is also larger and is not gated by Sumitomo's 6-inch InP wafers. Long AAOI against short COHR is an unnecessarily dangerous pair trade idea. x.comÂ
Rising 1.6T switching demand favors optical suppliers, though their execution risks vary. Bank of America says the market could grow ~101% annually through 2030. Marvell's leading DSPs and Lumentum's supply-short 200G EML lasers are lowest risk; Applied Optoelectronics' capacity expansion and Fabrinet's customer concentration make them medium risk. Aeluma remains pre-commercial, while Lightwave Logic's polymer modulators are a high-risk moonshot despite its TSM partnership. x.comÂ
Applied Optoelectronics is back in the junk bucket after dropping dilution news in Friday after-hours trading, a reminder of exactly who management is. Lumentum and Coherent are the calmer optical names to own instead. x.comÂ
Applied Optoelectronics still merits a positive view, though it is a buyer of lasers rather than an external seller like Lumentum. Companies sell lasers when laser capacity exceeds transceiver capacity and buy them in the reverse case. Per @BenBajarin's interview with an AWS networking engineer, optics demand faces a 20-30% supply gap, and Applied Optoelectronics' growing in-house lasers are a differentiator but also an execution risk. x.comÂ
Applied Optoelectronics is the US-built option in 800G datacenter transceivers, where there is almost no domestic supply. It is scaling its line in Sugar Land, Texas, while larger Innolight and Eoptolink build in Asia and Lumentum and Coherent are crowded large caps. It also makes its own lasers, which Goldman flags as the binding shortage through 2027. Revenue rose 86% last quarter, with net cash. Risks: a -12% operating margin, concentrated customers, and whether in-house lasers hold at 1.6T. … Show more
Applied Optoelectronics and Lumentum face lower optical transceiver demand as two new network designs cut optical links per GPU. Amazon says its Resilient Network Graphs use 69% fewer routers and became the default for most new AWS data centers by April 2026. OpenAI says its Multipath Reliable Connection protocol links over 100,000 GPUs with two switch tiers instead of three or four. B. Riley reportedly sees transceiver counts falling 40-50% and cut Applied Optoelectronics to Neutral. x.comÂ
Applied Optoelectronics might be the best opportunity right now amid a potential laser-supply bottleneck: AleaBitOfReddit reports that Lumentum's CEO said it was effectively sold out through nearly 2029, with hyperscaler demand visibility into 2030-31. That shortage could benefit AAOI. x.comÂ
Optics and photonics should be among AI's biggest winners as faster GPU networks need optical connections that suppliers cannot expand quickly enough. Lumentum says some components are sold out through early 2029; Sivers is investing $30M to target more than 100M lasers a year, with operations expected in Q4 2027. Potential US restrictions on Chinese transceivers could reshape supply in 2027. Applied Optoelectronics and Sivers are the favorites. x.com x.comÂ
Applied Optoelectronics' laser capacity could be worth much more if Marvell pays over $100B for Lumentum. That price would show how valuable laser capacity is and, in that scenario, AAOI could reach $200 within a quarter or two. The deal is only a rumor, and its price is unknown. x.comÂ
Optical transceiver demand exceeds supply, and 1.6T lifts revenue per module for suppliers able to qualify capacity. Applied Optoelectronics raised at least $1.62B through 2026 ATMs; its last reported monthly capacity was 200,000 modules versus a year-end target above 650,000. Credo expects over $600M in FY2027 revenue across optical DSPs, PICs and modules, not modules alone. Shipments, yields and margins must prove out. Lumentum and Coherent already price in much expected growth. x.comÂ
