Rising more than 150% in 2 days, AI new star stock Lumen "emerges slowly"

This week, a dark horse emerged in the AI field, with a 155% increase in just two days, attracting investors' attention. It is the fiber optic company Lumen Technologies.

Amid the artificial intelligence boom, Lumen announced better-than-expected Q2 results on Tuesday, along with a significant increase in full-year free cash flow guidance. The stock price soared for two consecutive trading days, rising by 155% in two days. Since early July, the cumulative increase has exceeded 500%.

Specifically:

Q2 revenue decreased by 10.7% to $3.27 billion, exceeding expectations.

Q2 net loss decreased significantly year-on-year to $49 million, compared to a net loss of $8.736 billion in the same period last year.

Q2 loss per share was $0.05, also a significant decrease year-on-year, compared to a loss per share of $8.88 in the same period last year.

Lumen's CEO Kate Johnson stated that the growing demand for artificial intelligence requires higher connectivity between data centers, and Lumen is in a position to help drive the wave of AI growth.

We are confident in our future growth and business transformation because we aim to achieve an AI economy.

Why Lumen?

On one hand, Lumen's fiber optic business has caught up with the wave of artificial intelligence, and on the other hand, its performance has improved, leading to a short squeeze in the stock price.

Firstly, Lumen's fiber optic business.

Lumen announced on Tuesday that with its strong network communication infrastructure, it has secured $5 billion in new business orders from major enterprises and is actively negotiating an additional $7 billion in AI fiber optic collaboration projects with customers, driving the stock price surge.

Lumen explained that due to the vigorous development of AI demand, fiber optic networks have become increasingly important and scarce in AI data processing. Large enterprises in various industries are seeking rapid access to fiber optic capacity.

As AI models for training and inference often generate large amounts of data distributed across servers globally, high-speed and stable networks are required for data transmission. Fiber optic networks, with their ultra-high bandwidth and low latency, have become the best choice for connecting these servers. In addition, AI applications have spurred the demand for edge computing, which involves computing near the data source to reduce data transmission latency. Fiber optic networks provide a reliable underlying infrastructure for edge computing.

Lumen's CEO Kate Johnson pointed out that the AI economy is changing enterprise operations:

Enterprises realize they need robust network infrastructure to manage unprecedented data flows and future demands. Everything happening now is just the beginning of a significant opportunity for Lumen, which will bring about the largest expansion of the internet in history.

Lumen stated that to meet the rapidly growing demand, it will more than double the mileage of its intercity fiber optic network over the next five yearsIn addition, in July, Lumen also reached an agreement with Microsoft. Microsoft will use Lumen's transmission services to connect data centers, while Lumen will purchase Microsoft's cloud tools to help automate business operations and save costs.

Furthermore, to support the construction of AI data centers, Lumen has also reached an agreement with fiber manufacturer Corning (GLW) to reserve 10% of global fiber component capacity for the next two years. This measure will help Lumen build new networks in the next two years to meet AI demands.

In addition to the positive developments at the business level, Lumen's significant stock price increase this time was also due to a short squeeze.

Bank of America pointed out that previously, due to dim growth prospects, Lumen had become a heavily shorted stock, with a short interest of 14%, second only to SATS' 18% short interest. This sudden sharp rise in Lumen's stock price on Tuesday forced short sellers to cover their positions, leading to a short squeeze and further skyrocketing of Lumen's stock price