Key insights
- Raymond James reiterates an Outperform rating on Applied Optoelectronics (AAOI), citing capacity expansion plans to reach $450 million in monthly production by mid-2027. The company aims to gain market share from Chinese competitors, with capacity additions primarily in Texas. Opportunities in co-packaged optics with potential partners like AMD and Amazon are also highlighted. While AAOI's direct influence is company-specific, the broader context of semiconductor capacity and competition, along with AMD's strategic moves, suggests a positive, albeit limited, read-through for the technology sector.
Investing.com - Raymond James reiterated an Outperform rating and $160.00 price target on Applied Optoelectronics (NASDAQ:AAOI). The firm maintained its view after hosting the company’s Chief Financial Officer Stefan Murry for investor meetings.
The optical transceiver market remains supply constrained, and Applied Optoelectronics has outlined plans to reach monthly production over $450 million by mid-2027. The company expects to turn up a portion of new capacity with tooling arriving in Texas in July.
Raymond James estimates that annualized earnings per share could reach $11.00 to $12.00 at the second-half 2027 capacity level. The firm’s annualized estimates for second-half 2027 stand near $3 billion, above consensus. Management’s second-half 2027 capacity target implies $6 billion in annual sales.
Applied Optoelectronics believes it can gain market share largely from Chinese competitors Innolight and Eoptolink. Most of the company’s capacity additions will be in Texas. Chinese competitor Innolight was recently added to the Department of Defense’s 1260H list.
Raymond James noted opportunities in co-packaged optics extending beyond Nvidia with AMD and Amazon as potential partners for external laser modules. AMD shares have surged 286% over the past year to a market cap of $767.6 billion, though InvestingPro data suggests the stock is currently trading above its Fair Value. According to InvestingPro Tips, AMD remains a prominent player in the Semiconductors & Semiconductor Equipment industry, with analysts anticipating continued sales growth—one of 23 key insights available to subscribers. The firm estimates module average selling prices could be $500 to $1,000 per piece.
In other recent news, Advanced Micro Devices (AMD) has entered into a partnership with Amkor Technology for packaging its products. This collaboration was announced after Amkor secured additional land in Arizona, where it plans to develop a new campus by 2028. In a related development, AMD CEO Lisa Su met with Chinese Vice Premier He Lifeng in Beijing, signaling a potential deepening of cooperation between AMD and China as trade relations stabilize.
Meanwhile, Wolfe Research has forecasted that agentic and orchestration CPUs will drive about 30% growth in the CPU market through 2028, with TSMC capacity playing a crucial role in determining market share. This projection is based on expected increases in the CPU-to-GPU ratio, particularly for Rubin Ultra. Additionally, Citigroup has provided an optimistic outlook for the server CPU market, projecting it to reach $132 billion by 2030, driven largely by agentic CPUs. The firm anticipates a compound annual growth rate of 185% for agentic CPUs, making them a significant contributor to the market’s expansion.
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