Applied Optoelectronics (AAOI.US) saw its stock price surge, gaining over 10% to trade at $175.6 in Monday's session. A prominent retail investor known as Serenity recently stated on social media that Applied Optoelectronics is his favorite stock in the optical communications sector. He believes the market may be underestimating the company's future earnings growth potential, driven by hyperscale cloud providers' continued heavy investment in building out AI data centers.

Serenity noted that he began building a position in AAOI last year when the stock was around $28, primarily based on the expectation that the company would secure certifications and orders from major tech firms like Amazon (AMZN.US) and Microsoft (MSFT.US). This thesis was later reinforced when the company's financial reports disclosed progress on its 1.6T optical modules and other large-scale orders, boosting market confidence in its growth outlook. By that time, AAOI's stock price had already climbed to around $70.

Moving into 2026, the stock continued its ascent to approximately $150. The core drivers behind the company's rising valuation are materializing, including tight manufacturing capacity for lasers, surging demand for high-speed optical interconnects from AI data centers, and supportive policies for U.S. domestic manufacturing. Furthermore, market discussions about future moves in the optical communications space by AI chip leaders Nvidia (NVDA.US) and AMD (AMD.US) have increased investor attention on related companies in the supply chain. Some analysts previously projected that the total addressable market for optical communications could expand significantly in the coming years, providing sustained growth momentum for leading industry players.