Applied Optoelectronics Has a Rare Problem Thanks to a Possible U.S. Ban on China

Most companies would love to be in the position that Applied Optoelectronics (AAOI) is in, but there’s an issue worth noting. A maker of optical parts for artificial intelligence (AI) data centers, Applied Optoelectronics just posted a record quarter. Revenue surged 86% from a year ago, and management guided the next quarter to be even higher. Yet the more interesting story, I believe, isn’t the growth it just delivered but rather what’s coming next.

U.S. regulators are reportedly planning to ban new Chinese-made optical transceivers, the components that move data between AI chips at high speed. If that goes through, U.S. buyers will need non-Chinese suppliers — and Applied Optoelectronics happens to be one of the largest suppliers based in the United States. On its recent earnings call, management said customers are already redirecting more orders to the company. Let's take a closer look.