Lumentum and Applied Optoelectronics Fall 4% as Pressure on AI Stocks Broadens
Key Facts
Shares of Lumentum and Applied Optoelectronics each fell about 4% in Thursday afternoon trading on November 12, amid a broader retreat in AI stocks, with Microsoft's objection to a proposal to regulate imports of Chinese optical equipment emerging as one source of pressure. Lumentum traded at about $623.58, while Applied Optoelectronics was at about $53.89, according to 24/7 Wall St. The article said the move was not tied to the meeting alone, but coincided with a broader wave of declines across the sector. The proposal targets newer models of optical transceivers made in China, equipment that connects data-center components and supports the expansion of AI infrastructure. The meeting related to Microsoft's position had not taken place during Thursday's session; reports pointed to meetings with U.S. officials on earlier dates.
24/7 Wall St. said Microsoft and other companies met on the evening of November 10 with officials from the White House Office of Science and Technology Policy and the National Security Council to present their concerns about the proposal. The article said the companies warned that a ban could slow data-center expansion, potentially complicating the supply of components needed for projects. In a separate account reported by Reuters on November 10, Microsoft representatives met U.S. officials in September to explain the expected impact on the supply chain. Reuters said the company was pressing the U.S. administration to halt plans to ban imports, citing three people familiar with the matter. John Miller, an official at the Information Technology Industry Council, warned that the restrictions could hinder data-center deployment, saying they "threaten to virtually halt their expansion."
U.S. concerns about Chinese equipment center on national security, with Reuters reporting that officials fear it could be used for spying, service disruption or the distribution of malware. According to 24/7 Wall St., the draft may apply only to imports of new Chinese models, with equipment already installed exempted. The article also said the draft could change or be withdrawn and exempts several non-Chinese suppliers. Federal Communications Commission officials have not set a date for a vote on the proposal. Its potential focus on new models means its scope would relate to future equipment, while installed equipment would remain outside the restrictions under the circulating draft.
The issue matters to U.S. optics companies because China accounts for about two-thirds of the global optical-transceiver market, according to an estimate cited by 24/7 Wall St. Zhongji Innolight holds about 27% of the global data-center transceiver market, according to the same article, and is listed by the Pentagon as a Chinese company linked to the military. Applied Optoelectronics, meanwhile, depends significantly on Microsoft; the company accounted for 28.8% of its revenue in 2025. Applied Optoelectronics' revenue rose to $455.715 million in 2025, from $249.365 million in 2024, according to its annual report filed with the U.S. Securities and Exchange Commission. The figures show the company's exposure to risk tied to a major customer as the potential scope of restrictions on Chinese suppliers takes shape.
Thursday's move followed a strong session for several companies in the sector on November 11. Lumentum shares rose 10.67% and Coherent gained 9.25%, while EL7 data showed Applied Optoelectronics closing at $55.86 and Lumentum at $648.06. In the following session, Coherent shares were little changed at about $234.44, holding on to most of the previous session's gains, while the other two stocks fell 4%. Microsoft shares also fell 2.26% on November 11, closing at $521.13. The comparison shows divergent performances over two consecutive days, with Thursday's declines in Lumentum and Applied Optoelectronics coinciding with broader weakness in AI stocks.
The regulatory debate is tied to Microsoft's major expansion plans; 24/7 Wall St. reported that it has 35 data centers under construction in the United States and another 134 planned, for a total of 169 across both stages. In presenting their concerns, companies said the restrictions could slow expansion, while Miller pointed to the possibility of data-center disruptions if the optical transceivers needed to connect AI chips were unavailable. According to the article, a speed threshold of 3.2 terabits per second is under consideration in the proposal. Morgan Stanley expects products at that speed to begin expanding in 2028, with large-scale installations starting in 2029. Applied Optoelectronics' management expects demand for its high-speed modules to exceed its production capacity throughout 2027.