Applied Optoelectronics (AAOI) Is Up 9.0% After Announcing Major Texas AI Transceiver Manufacturing Expansion – Has The Bull Case Changed?

• Applied Optoelectronics and the City of Sugar Land recently announced that AOI will expand its U.S. manufacturing operations by onshoring part of its international production to Sugar Land, Texas, supported by a US$2 million incentive package and a US$150 million capital investment, including a new 210,000-square-foot facility for advanced optical transceivers serving AI-focused data centers.
• This expansion is expected to add over 500 new technology and engineering jobs in Sugar Land over five years and is projected to establish the largest domestic production capacity for AI-related datacenter transceivers in the United States.
• We'll look at how AOI's major investment in AI-focused manufacturing in Texas reshapes the company's long-term growth and industry positioning.

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Applied Optoelectronics Investment Narrative Recap

Owning Applied Optoelectronics means believing in the growing demand for high-speed optical components, especially as AI data centers expand. The company’s decision to onshore manufacturing to Texas addresses a key catalyst, securing U.S.-based capacity for large datacenter customers, which should support revenue growth in the near term. However, the move does not materially reduce the significant customer concentration risk, which remains the most important challenge for the business today.

One closely related announcement came in August 2025, when AOI completed a US$150 million common stock offering. This follows a series of equity raises to fund manufacturing and R&D investments, reinforcing the company’s expansion plans as a direct response to accelerating demand for AI and cloud infrastructure products.

Yet, despite this expansion, investors should also be alert to the continued reliance on just two key customers for nearly all of AOI’s revenue...

Read the full narrative on Applied Optoelectronics (it's free!)

Applied Optoelectronics' outlook anticipates $1.3 billion in revenue and $111.0 million in earnings by 2028. This projection requires 51.5% annual revenue growth and an earnings improvement of $266.7 million from the current earnings of -$155.7 million.

Uncover how Applied Optoelectronics' forecasts yield a $28.40 fair value, a 24% downside to its current price.

Exploring Other Perspectives

Seven fair value calculations from the Simply Wall St Community span US$28.40 to US$75.38 per share. While investor opinions differ greatly, remember that AOI's customer concentration risk can sharply influence future earnings and market sentiment.

Explore 7 other fair value estimates on Applied Optoelectronics - why the stock might be worth 24% less than the current price!

Build Your Own Applied Optoelectronics Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Applied Optoelectronics research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.
• Our free Applied Optoelectronics research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Applied Optoelectronics' overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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