AAOI Wins Major Hyperscaler Approval as Revenue Surges 139%
Applied Optoelectronics, Inc. (AAOI) has received a significant boost with approval as a supplier for major hyperscalers like Microsoft, Meta, and potentially Amazon. This news comes amidst a bullish thesis published on Value Degen's Substack and a substantial increase in AAOI's revenue.
AAOI's Q2 revenue surged by 139% year-over-year, with trailing twelve-month revenue up 77%. The company is projected to see another 12-23% rise in sales in the near term. This growth is partly driven by the ongoing data center buildout in the U.S., expected to reach 10GW annually by 2030. AAOI's products, including transceivers crucial for converting fiber optic to electronic signals, are in high demand, with the market projected to expand from $15 billion to $35 billion by 2029.
The company's potential is further highlighted by a bullish thesis published on Value Degen's Substack. If AAOI regains a 5% market share, revenues could approach $2.5 billion, implying a market value near $9 billion and a stock price above $140. Even maintaining its current 2% market share could see revenues surpass $1 billion by 2029, doubling its market cap.
As of September 25th, AAOI's share price was $26.34, with a forward P/E of 84.03. Despite this growth, AAOI is not among the 30 most popular stocks among hedge funds, with only 15 portfolios holding the stock at the end of the second quarter. Notable investors include Neuberger Berman Group LLC, Vanguard Group Inc, and Driehaus Capital Management LLC.
AAOI's approval as a supplier for major hyperscalers, combined with its impressive revenue growth and market potential, positions the company for significant progress. However, the key risks remain quality execution and the sustainability of hyperscaler investment. With a forward P/E of 84.03, investors are betting on AAOI's ability to capitalize on the expanding stock market for its critical transceivers.
