Why Apple Is Pumping About $400 Million Into Finisar

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Finisar Corp. (NASDAQ: FNSR) saw its shares soar early on Wednesday after the firm announced that Apple Inc. (NASDAQ: AAPL) would be investing $390 million. Specifically, Apple is investing this sizable sum to increase the production of chips that power multiple iPhone X features.

This is the second investment from Apple’s $1 billion advanced manufacturing fund. The goal of this fund is to foster innovation and create jobs. The original investment was $200 million into Gorilla Glass manufacturer, Corning Inc. (NYSE: GLW) back in May.

Finisar intends to use the money to transform a previously closed plant in Sherman, Texas, to make high volumes of laser diodes, known as vertical-cavity surface-emitting lasers (VCSELs).

Back in its fourth quarter of 2017, Apple had announced that it would buy 10 times more VCSELs than were made worldwide.

According to Apple:

The 700,000-square-foot plant expects to begin shipping in the second half of 2018, and its output will make Sherman the VCSEL capital of the US. Finisar will soon start hiring 500 highly skilled workers and Armstrong, born and raised there, is busy getting the building ready.

Shares of Finisar traded up about 28.7% at $24.85 Wednesday morning. The consensus analyst price target is $23.13, and a 52-week trading range is $17.20 to $36.41.

Apple traded at $173.00 a share, in a 52-week range of $114.76 to $176.24 and with a consensus price target of $187.74