Jay Yoon
Founder & Portfolio Manager of Summit Ridge Capital Management
Applied Optoelectronics is lagging as the market becomes more discerning between low-quality companies and high-quality ones with durable growth. @GavinSBaker said weeks ago the AI bottleneck trade was over, and that has played out in optics: Lumentum keeps climbing while weaker names like Applied Optoelectronics lag. x.com x.com
Applied Optoelectronics' risk/reward is worth taking now that it seems to have somewhat fixed its history of very poor execution, but it merits smaller sizing than Lumentum because execution is what ultimately matters. The POET debacle shows how such stories can go wrong, and AAOI could still end up a disaster as well. x.com
Co-packaged optics standards could make finished transceiver modules smaller and more interchangeable as chip designers build optical engines inside their packages. That is another reason to avoid Lumentum, Coherent and Applied Optoelectronics and prefer Soitec. Lumentum and Coherent now earn a lot from finished modules, leaving them exposed if the architecture changes. x.com
Applied Optoelectronics is in the right place at the right time but isn't a high-quality business; it mainly serves as spillover capacity when Lumentum, Coherent and Marvell can't meet demand, so why own it over Marvell? Management also draws terrible Glassdoor reviews, 1.7 of 5 stars, 1% CEO approval and 7% recommending it across 124 reviews, pointing to high turnover and operating risk. The tone of its earnings call was also off-putting. x.com x.com x.com
Applied Optoelectronics' case now hinges on visible production progress. Its drop on OpenAI's revenue run-rate figures reflected an accounting question, not any change in laser or memory supply, per Carrio Research. If AAOI fails again next quarter and pushes its timelines out another quarter, it will be ugly. x.com
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.com
Applied Optoelectronics keeps promising things it cannot deliver. It is now the second-priority short behind CoreWeave, reversing earlier confidence that Dr. Lin would deliver despite delays. x.com
Applied Optoelectronics should trade above $150, in part because Lumentum's CEO says its optical components are sold out through early 2029 and it cannot meet roughly 70% of demand for some products through 2027. That industry signal strengthens the case for AAOI's expanding 800G/1.6T offerings after completion of its $600M ATM, with shares around $110. x.com
Applied Optoelectronics' durability beyond the pluggable cycle is in doubt: instead of staying euphoric on pluggable growth, the market is already asking what comes next. It still has a low starting valuation and accelerating fundamentals, but longer-term durability is missing, and the stock failed to bounce hard after a sharp drawdown. x.com
Networking is the next AI hardware trade after memory, whose share of rack value rose from 15% to 35%. Optics is moving inside the server, as Nvidia's Feynman architecture builds in co-packaged optics and silicon photonics. Scale-across networking could grow 30% a year just linking existing data centers, as inference moves closer to users and training spreads across sites. Supply is tight: Lumentum's CEO said it can meet only 30% of expected 2027 demand and sees optics tighter than memory. x.com
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.com
Applied Optoelectronics, Lumentum and Coherent face share losses at US hyperscalers to Innolight. Channel checks favor Innolight gaining share in Q2 2026, at the expense of those three. Per @poezhao0605, a $7B Hong Kong IPO, the largest in years and upsized from $5B on strong demand, has cleared its listing hearing. x.com
