Applied Optoelectronics (AAOI) experienced a pre-market plunge of 6.02% on Tuesday, as the optical communications stock faced significant selling pressure.

The decline was primarily driven by persistent market concerns over delayed commercialization of co-packaged optics (CPO) technology. A recent SemiAnalysis report indicated that large-scale CPO adoption may be pushed back to 2028 or even 2029, significantly later than previous market expectations of full deployment by 2027. The report cited potential system-level yields as low as approximately 19.4%, highlighting significant challenges in production yields, system integration complexity, and cost economics.

Additionally, CEO Chih-Hsiang Lin's recent disposal of shares added a modestly cautious signal for sentiment-sensitive investors, contributing to the downward pressure on the stock. The bearish sentiment affected the broader optical communication sector, with peers also showing weakness during the session.