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KEY TAKEAWAYS

• Shares of Applied Optoelectronics are surging more than 50% in premarket trading after the optical products maker said it had struck a deal with Amazon that gives the tech giant the right to buy almost 8 million shares of its stock.

• The company develops advanced optical products that are used within internet data centers, which are needed to power AI technology.

• Applied Optoelectronics' stock is up around 13% in the past 12 months through Friday.

Applied Optoelectronics' (AAOI) stock is surging more than 50% in premarket trading after the optical products maker said it had struck a deal with Amazon (AMZN) that gives the tech giant the right to buy almost 8 million shares.

In a filing with the U.S. Securities and Exchange Commission (SEC) Thursday, Applied Optoelectronics said it was issuing a warrant to the tech giant to buy up to 7.945 million shares of stock.

"Subject to vesting and certain conditions set forth therein, the Warrant may be exercised, in whole or in part, at any time before 5:00 p.m., Seattle time, on March 13, 2035 at an exercise price of $23.6954 per share," the company said in its filing.

Applied Optoelectronics develops advanced optical products that are used in broadband fiber access networks within internet data centers. It is headquartered in Sugar Land, Texas, and has engineering and manufacturing facilities in Taiwan and China, according to the company.

Tech firms, including Amazon, are heavily investing in data centers to fuel cloud computing and the surge in demand for artificial intelligence (AI).

Applied Optoelectronics shares fell 8% to close at $15.87 Thursday. They are up more than 13% in the past 12 months through Thursday.

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