Short-seller Citron Research issued a report on Applied Optoelectronics Inc (AAOI) this Friday. The firm announced a new short position in the fiber-optic networking company. Citron cited a "delusional" valuation following a massive two-week surge.

Short interest in AAOI fell to 10.30 million shares from 10.56 million, representing 13.68% of the float. At an average daily volume of 14.45 million shares, it would take about one day to cover.

Citron Challenges Recent Stock Momentum

The stock has skyrocketed approximately 73% from March 30. Prices moved from $85.19 to $147.50 on Friday. Citron Research, led by Andrew Left, questioned the validity of this move on X.

AAOI rose from $85 two weeks ago, adding roughly $3.5 billion in market value following a "random press release," the short-seller said. Citron predicts a return to the $85 level "once the roulette wheel stops spinning."

Comparing Hyperscaler Partnerships

Citron contrasted AAOI with Lumentum Holdings Inc (LITE) and Corning Incorporated (GLW). The firm remains "Long" Corning and respects Lumentum as Nvidia Corp.'s (NVDA) "chosen partner."

Conversely, Citron criticized AAOI's reliance on Oracle Corp (ORCL), citing Oracle's "$100 billion in debt", "30,000 layoffs", and "negative free cash flow."

Valuation Multiples Under Fire

Citron argues that AAOI's current trading price lacks fundamental support. According to the report, the stock trades at 112 times forward earnings.

"Nvidia at its peak… peaked at 40x forward earnings," Citron noted. The firm emphasized that AAOI possesses only "31% gross margins" and "zero pricing power." Citron concluded that investors are "paying beyond monopoly multiples for commodity economics."

Applied Optoelectronics did not immediately respond to a request for comment.

Background: Data Center Orders Fuel Surge

The stock's recent momentum stems from an upsized hyperscale data-center order. Applied Optoelectronics received a new $71 million order for 800G single-mode transceivers.

This brings the total orders from one customer to $124 million since mid-March. The company also confirmed shipping 10,000 units to a second hyperscale customer, signaling broader demand for its 800G optics through year-end.

AAOI Stock Price Activity: Applied Optoelectronics shares were up 11.36% at $148.44 at the time of publication on Friday, according to market data.