Why lumen stock went down today

Lumen (LIGHT -14.54%) shares fell in trading on Tuesday. The company’s share price ended the daily session down 14.5%, according to data from S&P Global Market Intelligence.

Lumen fell today following a new short report on the stock published by Kerrisdale Capital. The short seller revealed that he had placed an investment bet against the telco and laid out why he believed the stock’s recent bullish momentum was unwarranted.

Kerrisdale believes Lumen’s AI opportunities are overblown

Even with today’s pullback, Lumen stock is still rising this year thanks to excitement surrounding the company’s artificial intelligence (AI) opportunities. The company has already won about $5 billion in contracts to provide high-speed fiber services to data centers and said it could have an additional $7 billion in contracts in the works. But Kerrisdale Capital doesn’t think AI contracts will make Lumen’s dreams come true.

Entitled his recently published short report “AI-N’t Gonna Fix This Mess,” Kerrisdale went on to detail why he believed AI-related contracts would not be able to generate a return for Lumen. The short seller pointed to secular declines in the telecom’s core business and a $19 billion debt load as reasons the stock’s recent gains have been unwarranted. The stock is still up about 195% over the past month despite today’s big selloff.

What’s Next for Lumen Stock?

Kerrisdale is skeptical that the $7 billion in additional AI sales opportunities will ever come to fruition, and doesn’t think recent contract wins will do much to reverse declining sales and margin trends. The short seller believes Lumen stock has virtually no chance of delivering positive shareholder returns at current levels and urged investors looking for the next potentially explosive AI play to look elsewhere.

While Lumen may yet score more AI-related wins, the company’s outlook for it remains speculative. The business still has a long way to go, and it’s far too early to say that AI will pave the way for a sustainable, long-term comeback.