Lumen Technologies extends record rally on AI hopes

Lumen Technologies shares surged as much as 93% in post-market trading Tuesday, extending gains after notching a record one-day jump in the regular session.

Driving the gains was excitement over artificial intelligence and its ability to translate into results for the company. In earnings released after the bell Tuesday, Lumen raised its forecast for free cash flow for the year, saying it expected between $1 billion and $1.2 billion. Previously, it had forecast free cash flow between $100 million and $300 million. Wall Street analysts covering the company expected the forecast to be about $217 billion, data compiled by Bloomberg show.

Shares of the telecommunications company had already had a big day ahead of the report. The stock closed 93% higher on Tuesday, the biggest jump on record to the highest value since February 2023, after the company said artificial intelligence demand has driven $5 billion of new business and that it is in talks for a further $7 billion in potential sales.

Lumen’s results come as investors are growing increasingly skeptical of the AI trade after earnings from megacap technology companies signaled increased spending with little return on investment. The Nasdaq 100 Index recently fell into correction territory, weighed down by declines in AI darlings like Nvidia Corp, Microsoft Corp and Amazon.com.

To be sure, Lumen also said it would boost its capital expenditures to tap into what it sees as increasing demand for AI.

“Lumen appears poised to construct new facilities to tap an emerging opportunity for AI-related data center interconnect, as management raised 2024 capex guidance by $400 million,” Bloomberg Intelligence analyst John Butler wrote in a Tuesday note. “Yet it’s unclear how much revenue that might generate and when.”

He also added that much of the company’s boosted cash flow – some $700 million – was due to a one-time tax refund, and not AI.

Wall Street is largely skeptical of the company, which has no buy ratings, seven holds and six sells from analysts covering, according to data compiled by Bloomberg. Still, the stock has been on a tear — shares have gained more than 350% from the start of July through Tuesday’s close.