This ‘left for dead’ Louisiana tech firm is on a stock market tear. The reason: AI.

A supercharged performance by a Monroe-based technology firm focused on the AI boom has sent an index of Louisiana’s publicly traded companies soaring.

Shares of Lumen Technologies, which builds the fiber optic networks that connect data centers and other critical components of the internet, rose 545% over the three months ending September 30 after Microsoft said that it would use Lumen products to expand its AI infrastructure.

Those gains made Lumen by far the best performer among the 20 companies in The Times-Picayune | The Advocate’s Pelican State Portfolio, which outpaced the rest of the U.S. stock market in the third quarter.

The Pelican Portfolio rose 37.23% over the past three months, while the Russell 2000, a stock market index that tracks smaller publicly traded companies, rose 8.75%. The S&P 500, a broad index that tracks the largest U.S. companies, was up 5.33% for the quarter.

Companies with ties to artificial intelligence have been some of the best performers over the past year. Chipmaker Nvidia is up more than 700% since the start of 2023, for instance, as investors have rushed to make bets that AI will reshape many aspects of work and life in coming years. 

Lumen, which was founded in 1930 as a small regional telephone company, grew into a telecom giant in the 2000s when it was known as CenturyLink. But in recent years, it had seen its fortunes slip, according to Peter Ricchiuti, a finance professor at Tulane University who tracks regional stocks across the South through the university’s Burkenroad Reports.

Ricchiuti said Lumen was “left for dead” when in an attempt to whittle down a $20 billion mountain of debt, Lumen sold off its local telephone business and in 2022 dropped its quarterly dividend. The stock was trading at just $1.10 a share at the end of June.

Things changed dramatically, however, in late July, when Lumen’s partnership with Microsoft was announced. The software giant will use Lumen’s fiber products in its AI infrastructure.

A few weeks later, the company announced that it has signed $5 billion in AI connectivity contracts, including the Microsoft deal. Lumen said it was in discussions for another $7 billion worth of deals.

Lumen closed the quarter trading at $7.10 a share. 

“That contract with Microsoft really does change the whole look of the company,” Ricchiuti said. He compared it to when Apple announced a deal a couple of years ago for Covington-based Globalstar to serve as the satellite operator for its new emergency SOS service.

After all, Ricchiuti said, if a tech giant like Microsoft is doing business with Lumen, then they must be doing something right.

Banks benefit from rate cut

Louisiana bank stocks also shined in the third quarter, aided by the Federal Reserve’s decision in mid-September to slash interest rates by half a percentage point. It was the first rate cut in four years after a steady series of interest rate hikes designed to get inflation under control. 

Lower interest rates reduce the cost of bank funding and can lead to more borrowing from businesses and consumers.

Baton Rouge-based Investar Bank saw its stock price increase by nearly 26% during the quarter. Ricchiuti credited the gain to the bank improving the quality of its loans. First Guaranty Bank and b1Bank both posted 18% gains. 

Fifth District Savings Bank of Algiers made its debut on the Nasdaq exchange in August. The stock posted a modest 3.7% gain in two months of trading, but Ricchiuti said the performance “doesn’t mean too much” since the period of trading was so short. 

Entergy was another big winner, posting a 23% gain during the quarter. The utility company was boosted by improving economic conditions. 

Another factor in aiding the performance of Entergy is a general trend of investors looking at potentially higher profits for power companies due to the electricity needs of AI. 

“Utilities in general got a lot sexier, because there’s talk about AI using so much more electricity than expected,” Ricchiuti said.