Lumen Technologies Shares Surge to Best Month Ever Amid AI Frenzy

(Bloomberg) — Lumen Technologies Inc. shares leaped 150% in July for their best monthly gain on record, as artificial intelligence deals and short covering sparked a wild run after years of vicious selling.

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The stock is up more than 3% Wednesday, putting it on pace for a 15-day winning streak, the longest in its history. Lumen shares entered the month trading for $1.10 and are now above $2.75. They were down 40% through the first half of 2024 after losing 65% in 2023 and 58% in 2022.

Some of the gains should be attributed to “very large AI-driven fiber deals,” MoffettNathanson analyst Nicholas Del Deo, who has a sell rating on the company, wrote in a note Wednesday. He pointed to a July 24 deal with Microsoft Corp. to expand its network capacity and a July 30 deal with Corning that reserves 10% of Corning’s global fiber capacity to facilitate Lumen’s build of a new network to interconnect AI-enabled data centers.

A short squeeze also could be driving some of the gains. While betting against Lumen was a profitable trade from January to June, “shorts saw a drastic reversal of fortunes” in July with the trades down around $220 million, Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, wrote in an email to Bloomberg.

“Moving forward, we should see larger short covering as mark-to-market losses continue to climb, this squeeze, along with continued long buying, should help drive LUMN’s stock price even higher,” Dusaniwsky wrote.

Despite the recent positive news, Morningstar analyst Matthew Dolgin said in an interview that he is “skeptical how much things have changed,” and he doesn’t “expect the results to look that much different in the near-term” when Lumen reports earnings next week.

“I am reserving judgment on the Corning deal,” Dolgin said. “But when the company is committing to this type of expansion, it makes you think that the opportunity is bigger than we otherwise would’ve thought.”