Lumen Technologies Is Skyrocketing Due to Billions in AI Deals

Lumen Technologies (NYSE: LUMN) has experienced a dramatic turnaround in recent weeks, propelled by strategic networking deals, including a significant partnership with Microsoft (NASDAQ:MSFT), that have revitalized investor interest. The fiber and telecommunications company, which faced substantial debt challenges just a year ago, has seen its stock skyrocket by more than 300% over the past month. This surge has been fueled by the growing demand for fiber infrastructure to support artificial intelligence (AI) data centers, an area where Lumen has positioned itself to benefit significantly.

In early August, Lumen announced $5 billion in new business opportunities related to AI, with the potential for an additional $7 billion in more deals to come. The company also raised its free cash flow projection for the year to at least $1 billion, a significant increase from prior forecasts. This influx of cash provides Lumen with the liquidity needed to address its debt concerns and invest in its ongoing transformation efforts.

The surge in Lumen’s stock has been partly driven by short covering, as the company had become a popular target for bearish investors. As the stock price began to soar, short sellers found themselves facing significant losses, estimated at around half a billion dollars. This led to a short squeeze, further fueling the stock's upward momentum.

Lumen Technologies has made a remarkable comeback driven by strategic AI-related deals, but the company still faces significant challenges; it has posted a net loss in three of its past four quarters.

While management remains optimistic about the future, investors should be careful with the stock as it could be a volatile investment to hold given its high short interest.