Before I get started, let me clarify that this article is for informational purposes only and does not constitute investment advice. Please don’t sue me.
By now, it is clear that AI-related demands have the potential to skyrocket valuations and drastically improve business for some companies.
The semiconductor industry as a whole has exemplified just how profitable AI demand has been for a few fortunate (or perhaps shrewd) investors. Recently though, I believe there could be an industry that has been overlooked in light of the AI revolution. Fiber optics.
If you have no idea what I am talking about, let me explain. Fiber networks have become indispensable for AI datacenters due to their ability to handle high bandwidth demands, provide ultra-low latency, and offer scalability for future growth. Their reliability and stability make them crucial for uninterrupted AI operations, while fiber optic energy efficiency also aligns with the industry’s push toward sustainability. Additionally, fiber networks are crucial for connecting datacenters spread across different locations, allowing them to work together efficiently. This is important for handling large AI workloads that require coordination and data sharing between various sites. Connectivity of this kind is essential for AI-driven tasks like real-time financial trading, where split-second decisions across global markets are crucial; autonomous vehicles, which need to process and share data from various sources to navigate safely; and large-scale AI model training, where vast amounts of data are distributed across multiple datacenters to speed up the learning process.
To illustrate what this could mean for investors, let’s look at a recent example: Lumen Technologies, a telecom company known for its fiber solutions, has experienced remarkable growth in its stock price. One month ago, on July 10, the stock was priced at $1.05 USD with a market cap of around $1 billion. Today, the stock sits at $5.57 USD and even reached a high of $9.00 this week (after hours) before retracting slightly. So, what’s behind this dramatic surge in valuation? The answer is straightforward: demand for fiber is skyrocketing. As large companies across industry sectors look to secure fiber capacity quickly, Lumen has secured $5 billion in new business and is in active discussions with customers to secure another $7 billion. “The AI economy is changing business operations, and companies are recognizing they need powerful network infrastructure to manage the unprecedented data flows today and the demand in the future,” said Kate Johnson, president and CEO, Lumen Technologies. Lumen has even created a brand new Custom Networks Division to address the growing interest from hyperscalers and a variety of large firms who need fiber support, further underscoring the crucial role fiber networks will play in the continued expansion of AI and digital innovation.
Aside from Lumen, materials science company Corning has increased its second quarter sales guidance by around $200 million, crediting better than expected sales of its fiber products. Additionally, T-Mobile is investing heavily in fiber optic networks; the company has recently formed a joint venture with KKR to acquire Metronet, a residential fiber provider that will supply wholesale fiber to T-Mobile. For investors, these developments showcase the growing importance of fiber networks in an evolving market landscape. Also, I genuinely believe this fiber revolution is currently underappreciated, so if you are a savvy trader, maybe it is worth exploring…
Please note that this article is for informational purposes only and does not constitute investment advice. While efforts are made to ensure the accuracy and reliability of the information, it may not reflect the most current market conditions or developments. I am not liable for any decisions made based on this information.