What happened

Shares of WiMi Hologram Cloud (NASDAQ: WIMI) surged as much as 26% today after the company announced that its WiMi Hologram Soft Light technology has been cleared by regulators for the U.S. market. As of 2:30 p.m. EST, the stock had given up some of those gains but was still up 9%.

So what

The Chinese company, which creates holograms by leveraging augmented reality (AR) technology, had seen its stock skyrocket during the summer on hopes that it could find a variety of use cases for its hologram tech. Alibaba founder Jack Ma had showcased the technology at an artificial intelligence (AI) conference, which drove considerable hype.

Image source: Getty Images.

WiMi Hologram Cloud said that the Federal Communications Commission (FCC) has licensed and certified the WiMi Hologram Soft Light, a head-mounted display, for the U.S. market. The company collaborated with Japanese tech giant Sony to incorporate its image processing engine for improved colors and picture quality. WiMi Hologram Cloud is also looking to address potential issues with user fatigue that is commonly experienced with head-mounted displays. The device will be able to connect to various types of drones and cameras.

Now what

Expanding into consumer electronics could diversify and grow WiMi Hologram Cloud's business. The bulk of the company's revenue -- 84% of sales last year -- comes from AR-based advertising services, with the rest coming from holographic AR entertainment products.

The company had announced the product last month and expects to launch the head-mounted display by the end of 2020.

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Evan Niu, CFA owns shares of Alibaba Group Holding Ltd. The Motley Fool owns shares of and recommends Alibaba Group Holding Ltd. The Motley Fool has a disclosure policy.