AXT Slides 7% as Profit Taking Hits AI Optical Component Suppliers

Shares of compound semiconductor substrate manufacturer AXT Inc. dropped 7% to $40.46 in afternoon trading, retreating after a rally that has lifted the stock 147% year to date, according to market reporting published by Yahoo Finance.

The decline coincided with broader selling across suppliers tied to artificial intelligence data center infrastructure. The Tradr 2X Short AXTI Daily ETF (AXTQ), a leveraged inverse fund designed to return twice the opposite of AXT's daily share performance, surged 15% to $40.31 as traders positioned against the stock. Over the trailing 52 weeks, AXT shares have fluctuated sharply between $8.44 and $143.16.

Selling extended across the optical communications sector during a 2% drop in the Nasdaq 100. Shares of vertically integrated optical manufacturer Coherent declined 8% to $214.24, moderating its year-to-date advance to 16%, while transceiver maker Applied Optoelectronics slid 7% to $49.08.

The retreat follows third-quarter financial results reported by AXT on Oct. 29, which reflected surging demand for indium phosphide substrates used in high-speed optical transceivers for AI compute clusters. The company reported revenue of $73.41 million, up 162.6% year over year and topping consensus projections of $66 million. Adjusted earnings per share reached $0.41 compared to the $0.31 expected by analysts, while gross margin expanded to 56%.

On the earnings call, Chief Executive Morris Young stated that demand continues to outstrip available supply even as the company accelerates capacity additions. Young noted that AXT had more than quadrupled its indium phosphide revenue opportunity for the year. Wall Street's average price target for the stock stands at $91.50.

AXT occupies an upstream position in optical manufacturing compared to downstream peers. While Coherent operates an integrated model spanning crystal growth to finished modules and Applied Optoelectronics focuses on transceiver assembly and broadband gear, AXT specializes in raw indium phosphide, gallium arsenide, and germanium wafers through its Beijing Tongmei subsidiary. That concentration leaves AXT exposed to regulatory and corporate risks in China, where the company faces export permit requirements and potential redemption demands from Chinese private equity investors in Tongmei.

Investors are watching whether continuing data center buildouts will provide technical price support for AXT shares as the company works to bring expanded crystal-growth lines into production.