Applied Optoelectronics (AAOI) experienced a 24-hour plunge of 5.05% during the trading session, reflecting significant downward pressure on the stock.

The decline was primarily driven by persistent bearish sentiment surrounding co-packaged optics (CPO) mass production timelines. A recent SemiAnalysis report indicated that large-scale CPO adoption may be delayed until 2028 or even 2029, with system-level yield potentially as low as approximately 19.4%, which is far below market expectations for a rapid near-term volume ramp. Although NVIDIA has responded that CPO switches will begin mass production in the second half as planned, Morgan Stanley's assessment largely aligns with the bearish SemiAnalysis view. This has intensified bull-bear divergence and amplified selling pressure on high-valuation optical communication names like Applied Optoelectronics.

Applied Optoelectronics is a leading supplier of fiber-optic networking products, focused on cable television, fiber-to-the-home, and data center markets, and is among the few U.S.-based manufacturers with in-house InP laser production capability for AI optical modules.