Applied Optoelectronics: another trending stock in AI data center optics

Unlike Lumentum, $AAOI focuses on manufacturing specific equipment: optical transceivers.

These are modules that plug into switches and servers to transmit data over fiber optics. Inside each one are the company's own InP lasers. Essentially, this is the "circulatory system" of AI infrastructure. Without optics, it's impossible to connect thousands of GPUs into clusters for model training.

The company has been unprofitable for years, which is why it scores low on Bastion's Quality strategies.

However, expected growth rates are among the most spectacular on the market. The expected average annual revenue growth rate over the next 5 years is +73%. That's the top 1% of global stocks.

Management guidance for 2026: revenue above $1B, implying ~120% growth year over year. The company is targeting a $4.5B annualized run-rate by mid-2027.

On forward multiples, the stock trades at just 9x expected 2028 earnings.

But keep in mind that Applied Optoelectronics is a high-beta concentrated bet on pluggable transceiver shipments for AI data centers. Extreme customer concentration (top 3 = 91% of revenue), current unprofitability, and a single product line make it one of the worst scorers on the Bastion Antifragility rating.

The upside potential is there, but so is the very real possibility of ending up with a -90% loss.