Usman Salis
⬤ Applied Optoelectronics Inc. (AAOI) caught traders' attention after announcing progress in next-gen optical networking, pushing shares up more than 13% to around $35-$36—close to recent peaks. The spotlight is now on optical chips as crucial building blocks for AI data centers, where efficiently moving huge amounts of data has become just as important as raw GPU power.
⬤ What sparked the rally? AAOI landed its first volume order for 800G data-center transceivers from a major hyperscaler. These ultra-fast optical modules handle the intense data transfer demands of large-scale AI operations. Industry projections suggest that by 2029, 800G modules will dominate the market—but here's the catch: production capacity could fall 40 to 60 percent short of demand. This supply crunch has turned optical networking into a potential bottleneck for AI expansion, making suppliers like AAOI suddenly very strategic.
⬤ Wall Street responded quickly. Analysts bumped price targets into the $43-$50 range from mid-$30s just weeks ago, betting on 800G adoption momentum. Institutional buying has picked up, and options traders are positioning for further upside. With the stock trading near its 52-week highs, sentiment has flipped fast following confirmation of hyperscaler interest.
⬤ Why this matters: it highlights a major shift in AI infrastructure priorities toward high-speed optical connectivity. As AI systems grow, moving data between compute clusters becomes the real challenge—not just processing power. With 800G demand accelerating and supply struggling to keep pace, companies making advanced optical components could increasingly shape how AI infrastructure money gets spent across tech.
Usman Salis
