Why Lumen Stock Jumped Today

Lumen (NYSE: LUMN) stock managed to post gains in Tuesday's trading despite a big pullback for artificial intelligence (AI) stocks. The telecom specialist's share price ended the session up 2.5% despite a 0.5% pullback for the S&P 500 index and a 1.4% decline for the Nasdaq Composite.

Lumen stock announced today that it had hired Ciena to provide optical technologies for its AI initiatives today. The news helped the stock close out gains even as investors broadly sold out of AI stocks in response to macroeconomic risk factors and nervousness ahead of Nvidia's quarterly report tomorrow.

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Lumen stock rises on AI build-out indicator

Lumen has selected Ciena as its key partner for optical technologies that will be used to build out its telecommunications infrastructure for AI. Lumen says that the implementation of the technology will bring performance and cost improvements for operators, and it also plans to utilize Ciena's control suite to help automate and manage the operation of its fiber assets. The news caused investors to shrug off valuation pressures impacting AI companies today and bid up Lumen stock.

What's next for Lumen?

While some recent reports have raised concerns about the growth outlook in the AI data center and infrastructure market, Lumen appears to be moving ahead with big investments to expand its network capabilities. Despite the company's high debt load, investment in AI-focused networks appears to be breathing new life into the business -- and recent contract wins with Microsoft and Meta Platforms have some investors betting that the company can leverage demand for these technologies to power a return to sustainable sales and earnings growth.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.