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Applied Optoelectronics manufactures fiber-optic networking products for the cable TV, fiber-to-the-home, and data center markets. The Zacks Rank # (Buy) stock manufactures laser transceivers, which are a compact, high-performance module that acts as a bridge between electrical and optical communication.
This technology translates electrical data signals from network equipment (such as switches, routers, or GPUs). Laser transceivers are critical to the AI revolution because they overcome the speed and bandwidth limitations of traditional copper cables, making them valuable for enabling the massive, low-latency data flow required from training and operating large AI models. Additionally, with copper prices rising currently, these fiber optic cables are even more valuable.
New Bullish Catalyst: Hyperscale AI Contract Win
AAOI announced that it has landed its first volume order of 800G transceivers from a major hyperscale customer (rumored to be Amazon. This order will immediately be reflected in AAOI revenues. Additionally, when a company receives an order from a major tech juggernaut like Amazon, more orders often follow as new data centers are built.
Big Technical Breakout Signals Demand
Amid the contract win and multiple analyst updates, investors are rushing to get into AAOI shares. Shares are breaking out of a multi-week base structure and up more than 20% for the session as volume turnover has swelled to more than two times the norm, signaling massive institutional demand.
Meanwhile, roughly 18% of the float is short the stock. In other words, shorts are likely to be squeezed out of their shares in the coming days.
Explosive Revenue Growth
Wall Street analysts expect AAOI to grow revenues by a healthy 67% in 2026. However, this number is likely to be revised higher as the hyperscaler deal is taken into account.
Data Center Spending is Ramping
While 2025 was a strong year for data center spending, it is only expected to ramp further into the new year.
As competition between LLMs like ‘Gemini’ and ‘ChatGPT’ heats up, spending will increase. Meanwhile, 2026 is likely to be the year when robots and physical AI begin to appear in the mainstream (each of which requires data centers to train the AI).
Deep-Pocketed Customers
Beyond Amazon, AAOI has several deep-pocketed customers that are likely to spend more on AI including Oracle and Microsoft.
Bottom Line
As the battle for AI supremacy intensifies among global tech leaders, the demand for robust, high-performance networking hardware has never. Applied Optoelectronics finds itself at the center of this transition, benefitting from both a shift away from expensive copper and a surge in data center expansion.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: Applied Optoelectronics,Amazon, Oracle and Microsoft
For Immediate Release
Chicago, IL – January 29, 2026 – Today, Zacks Investment Ideas feature highlights Applied Optoelectronics (AAOI - Free Report) , Amazon (AMZN - Free Report) , Oracle (ORCL - Free Report) and Microsoft (MSFT - Free Report) .
AAOI: A Critical Link in the AI Revolution
Applied Optoelectronics manufactures fiber-optic networking products for the cable TV, fiber-to-the-home, and data center markets. The Zacks Rank # (Buy) stock manufactures laser transceivers, which are a compact, high-performance module that acts as a bridge between electrical and optical communication.
This technology translates electrical data signals from network equipment (such as switches, routers, or GPUs). Laser transceivers are critical to the AI revolution because they overcome the speed and bandwidth limitations of traditional copper cables, making them valuable for enabling the massive, low-latency data flow required from training and operating large AI models. Additionally, with copper prices rising currently, these fiber optic cables are even more valuable.
New Bullish Catalyst: Hyperscale AI Contract Win
AAOI announced that it has landed its first volume order of 800G transceivers from a major hyperscale customer (rumored to be Amazon. This order will immediately be reflected in AAOI revenues. Additionally, when a company receives an order from a major tech juggernaut like Amazon, more orders often follow as new data centers are built.
Big Technical Breakout Signals Demand
Amid the contract win and multiple analyst updates, investors are rushing to get into AAOI shares. Shares are breaking out of a multi-week base structure and up more than 20% for the session as volume turnover has swelled to more than two times the norm, signaling massive institutional demand.
Meanwhile, roughly 18% of the float is short the stock. In other words, shorts are likely to be squeezed out of their shares in the coming days.
Explosive Revenue Growth
Wall Street analysts expect AAOI to grow revenues by a healthy 67% in 2026. However, this number is likely to be revised higher as the hyperscaler deal is taken into account.
Data Center Spending is Ramping
While 2025 was a strong year for data center spending, it is only expected to ramp further into the new year.
As competition between LLMs like ‘Gemini’ and ‘ChatGPT’ heats up, spending will increase. Meanwhile, 2026 is likely to be the year when robots and physical AI begin to appear in the mainstream (each of which requires data centers to train the AI).
Deep-Pocketed Customers
Beyond Amazon, AAOI has several deep-pocketed customers that are likely to spend more on AI including Oracle and Microsoft.
Bottom Line
As the battle for AI supremacy intensifies among global tech leaders, the demand for robust, high-performance networking hardware has never. Applied Optoelectronics finds itself at the center of this transition, benefitting from both a shift away from expensive copper and a surge in data center expansion.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.