Applied Optoelectronics Poised for Triple-Digit Growth Amidst AI Boom
The company Applied Optoelectronics (AAOI) is positioned to capitalize on the AI boom due to its vertical integration, expanding profit margins, and multi-year deals. AAOI designs and manufactures fiber-optic networking products for various end markets, including internet data centers, cable television, telecommunications, and fiber-to-the-home.
The company's hottest business segment is the AI data center market, where big tech companies are building massive data centers to train complex AI models. These data centers require thousands of NVIDIA (NVDA) graphics processing units (GPUs), which are traditionally connected using copper. However, copper interconnects have physical limits regarding reach, power consumption, and thermal output, making optics more attractive for these uses.
AAOI's top-and-bottom line growth is currently in the high double-digit range, with Zacks Consensus Analyst Estimates suggesting that AAOI's EPS and revenue growth will grow to triple-digits in 2026 and 2027. The company has a multi-year deal with Amazon (AMZN), which provides AAOI with multi-year revenue visibility and validation from one of the leading hyperscalers.