Why Lumen Technologies Stock Is Skyrocketing Today

Lumen is one of the market’s hottest stocks today thanks to some big AI news.

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The stock of Lumen Technologies (NYSE: LUMN) is posting explosive gains in Tuesday’s trading. The company’s share price was up 87.3% as of 3:15 p.m. ET today, according to data from S&P Global Market Intelligence.

In a press release yesterday, Lumen showed that it’s benefiting from demand for fiber networks to support artificial intelligence (AI) services. Following the news, the stock received a ratings upgrade and price-target increase from Citigroup (NYSE:C).

Lumen is scoring wins thanks to AI

The company announced yesterday that it had secured $5 billion in new business thanks to AI-related demand. It also said that it was in talks with existing customers about additional deals that could lead to another $7 billion in sales.

The company recently forged a deal to provide fiber infrastructure to support Microsoft‘s (NASDAQ:MSFT) data centers, and it looks like AI and related cloud services are emerging as a substantial performance catalyst. Lumen says that it plans to more than double the size of its intercity network over the next five years, and management expects that its ability to provide AI-ready infrastructure to partners is just beginning to open up long-term opportunities.

An analyst upgrade, but there’s a catch

On the heels of the announcement and forecast, Citi analyst Michael Rollins upgraded his rating on Lumen stock from sell to neutral. He believes that major new fiber deals will give the company the flexibility to reduce its debt load, improve earnings, and create spinoff opportunities.

Rollins also increased his one-year price target from $1.25 per share to $3.15. But with the pricing surge that the stock has already seen today, the analyst’s new target actually suggests potential downside of roughly 35%.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Fool contributor Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends Microsoft. The Motley Fool has a disclosure policy.

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