Three companies supplying the infrastructure behind artificial intelligence entered September significantly below their 2026 peaks, even as their most recent financial results showed strong growth.
According to a report by Yahoo Finance, Vertiv Holdings, Applied Optoelectronics, and Innodata each occupy a different part of the AI supply chain. Vertiv sells power and cooling equipment for data centers. Applied Optoelectronics supplies optical transceivers used in high-speed data transmission. Innodata provides data engineering and model-evaluation services.
Vertiv posted second-quarter sales of $3.27 billion, a 24% increase. Its adjusted operating margin expanded 410 basis points to 22.6%, and adjusted free cash flow reached $925 million. Hedge fund interest in the company has grown. Insider Monkey counted 112 hedge funds holding Vertiv in the second quarter, up from 96 in the first. Cliff Asness's AQR Capital reported holding 2,686,683 shares, 0.5% more than the prior quarter. The bull case for Vertiv rests on rising power and thermal content per AI rack. The risks include project timing, supply congestion, and expectations built around long-duration demand.
Applied Optoelectronics posted record revenue of $191.9 million. Its 800G volume more than doubled from the first quarter, and management expects 800G and 1.6-terabit demand to exceed production capacity through mid-2027. That capacity constraint is the core of the bull case. The risks are different. The company posted a GAAP gross margin of 27.7% and a GAAP loss of $22.8 million. Customer concentration and execution risk add to the bear case. As of the August 14 short-interest settlement, 10,421,985 shares were sold short, equal to 12.81% of float, with 0.69 days to cover. Fifty-four hedge funds held the stock in the second quarter, down from 55. Value Aligned Research disclosed 1,595,124 shares, 26% more than the prior quarter.
Innodata grew revenue 58% to $92.1 million. Adjusted EBITDA rose 92% to $25.4 million. Its reusable data sets and model evaluation work have the potential to expand margins. The risks include dependence on large customers and rapidly changing model-training methods. Twenty-five hedge funds held the stock in the second quarter, up from 20. Mitch Rubin's RiverPark Advisors reported 2,042 shares, 18% more than in Q1.
The three companies are not interchangeable. Vertiv carries the strongest cash generation. Applied Optoelectronics has the sharpest capacity upside. Innodata has the lightest physical footprint. Each also faces a different type of timing risk. Vertiv can lose if data-center construction slows. Applied Optoelectronics can lose during its manufacturing ramp. Innodata can lose if a major customer switches vendors or changes its training methods.
The report cautions that distance from a prior high is not a valuation tool. Order conversion, gross margin durability, customer concentration, and diluted share growth are the measures that matter. The pullback lowers entry prices, but operating evidence is what determines whether value is actually there.
