Shares of optical fiber producer Corning (GLW -13.70%) fell hard on Monday, down 13% on the day as of 2:05 p.m. EDT.
Virtually all hardware companies related to the AI infrastructure build-out were down today; however, Corning took an even larger hit, as it announced after market close last Friday that it would also be selling stock to fund its build-out.
NYSE: GLW
Key Data Points
Corning sells shares into a declining market
Last Friday, Corning announced in a filing that it would sell up to $2 billion of stock on the open market through an at-the-market equity sale program, to be administered by Goldman Sachs.
The reason is that Corning has committed to meeting massive demand from AI companies in advance and needs to invest the capital required to produce more optical fiber. Today, Mizuho Financial Group analyst John Roberts lowered his price target on Corning, saying that, "While optical cabling and connectors are relatively asset-light, furnaces for glass optical fiber production are asset-heavy."
Even after today's stock price decline, a $2 billion share sale would only result in about a 1.6% dilution of shareholders. Still, these types of programs are usually met with some selling by the market, as news of dilution generally sparks a short-term sell-off.
However, today's move was particularly severe, as the sectorwide sell-off in AI stocks drove Corning's share price down sharply. This was the result of this past weekend's blog post from Dario Amodei, CEO of Anthropic, who advocated for a slowdown in frontier model training due to disproportionate risks.
Announcing that you need to sell stock into a declining market can exacerbate the downdraft, so it's no surprise to see Corning falling today. Additionally, investors may be wary that all this investment by Corning may be directed toward facilities that could face lower demand should an AI training slowdown or halt occur.
Image source: Getty Images.
Buying opportunity?
If the AI industry halts or materially slows down frontier model training, that could affect the growth of optical fiber connectivity in the future. It has been forecast that hyper-dense AI data centers will gradually replace copper connections with optical ones within server racks and even within servers themselves at some point.
However, any training halt won't slow inference, which still requires many low-latency connections that only optical fiber can provide.
So while optical demand might not accelerate at hyper-speed, the sub-sector should still see healthy growth. That likely makes today's sell-off in Corning, and really in all AI infrastructure stocks geared toward inference, a buying opportunity.
