10 Small Cap Stocks with Huge Upside Potential

4. Applied Optoelectronics, Inc. (NASDAQ:AAOI)

Upside Potential: 133%

Market Capitalization: $823.092 million

Applied Optoelectronics, Inc. (NASDAQ:AAOI) is a Texas-based provider of fiber-optic networking products. This vertically integrated company engages in the design and development of optical communications offerings, such as advanced optical devices, laser transmitters, cable televisions, point-to-point communications and wireless, and HFC networking. Founded in 1997, the company is dedicated to transforming communication by connecting the world more efficiently.

Recently, Applied Optoelectronics, Inc. (NASDAQ:AAOI) has made headlines with its deal with Amazon, which allows the tech giant to purchase up to 8 million of the company’s shares. As appealing as the deal looks from the outside, the company has yet to disclose the underlying terms. But it clearly implies one thing – AAOI is all in for a big game.

Applied Optoelectronics, Inc. (NASDAQ:AAOI)’s Q4 2024 earnings showcased improved performance, delivering revenue and gross margin within the forecasted range. Much of the revenue growth was attributed to the powerhouse’s 400G products, CATV segment, and expansion of production capabilities. Management also mentioned receiving a big order for its Quantum Bandwidth networking products from a leading cable operator based in North America. The returns will be reflected in the upcoming financial results, as the shipping began this month.

The strong need to produce some products domestically to meet the strict data center requirements has led Applied Optoelectronics, Inc. (NASDAQ:AAOI) to open a new production facility in Texas. The company also plans to expand in Taiwan through another production facility for a robust global presence.

The demand for AAOI’s cloud computing infrastructure and data centers makes it a strong case. And from what we can expect, the demand can be from the tech titan Amazon itself. With a one-year price target of $38.20, the company’s upside potential of 133% is a testament to our bull stance. It is among the best stocks with the biggest upside.