What happened

Applied Optoelectronics (NASDAQ:AAOI) had a volatile first half of 2018, according to data from S&P Global Market Intelligence. Share prices fell as much as 40% before bouncing back, and the maker of optoelectronic components for fiber-optic networking systems locked in an 18.7% year-to-date gain at the end of June.

So what

In early 2017, Applied Optoelectronics saw its largest customer -- Amazon.com -- rack up a huge stockpile of fiber module orders to support the expansion of its cloud computing data centers. The orders stopped coming mid-year as Amazon started to work through its massive oversupply, and Applied Optoelectronics took that shift right on the chin.

But it only took a couple of positive analyst reports to start turning things around in April, followed by an impressive investor conference at the end of May. Shares surged 13% higher in April with another 17% single-day lift in late May.

A bundle of lit fiber-optic wires against a black backdrop.

Image source: Getty Images.

Now what

Applied Optoelectronics may have posted an impressive return in early 2018, but the stock remains 44% below its 52-week highs. If the company can follow through on the promises management made at the investor conference, we should see a return to revenue growth and stronger earnings in the next few quarters.

Either way, it's clear that optical networking has a lot of growth catalysts coming up in the next couple of years. Buying Applied Optoelectronics at these sharp discounts to fairly recent highs could make sense.