Personal take with enough analysis from the chain. Partially right, but issue is even if they can’t take prices up, they’ll be fully booked for a few years to come simply due to their small capacity size. When you have that demand visibility the stock isn’t priced inefficiently, it just needs time to be full priced.
Great questions, have enjoyed enough of your analysis to try and provide inputs.
1 - unsure, never will be sure on anything regulatory related in China.
2 - well let’s do math. 3Q25 mgmt call said they can do $20mn worth of InP (per quarter), since then indium prices / 7N InP have went up 40%. Take out CNH appreciation and just say 35%, 20*1.35 = 27mn a Q. They said they’re on track to 2x capacity by 2H26 and double again in 27, conservative guide tells me by EOY 27 they CAN do 108mn per Q of InP revenues. 400mn rev is <5x fwd PS, cheaper than LITE.
3 - LITE / COHR said post the NVDA investment that they locked up Sumitomo’s supply for the next 7 years. Generally a good sign of demand beyond 2-3 years. If Jensen says we need a lot more demand I’ll give it to em. 100mn per Q isn’t a lot in the semi space, especially for physically constraining materials.
TL;DR - mgmt conservative math says this is cheaper than LITE, demand prob okay. Unsure on permit timing.
Hey @openrouter , great observation/question! So that's part of this whole thing. When I said it is 'framed' this was is because that's exactly right.
This is a direct quote from AXT's latest earnings call:
"And, you know, there's not – how many suppliers are there? You know the answer to that. two, and we're one of them, so."
So myself, and many others, took this to believe that between AXT and Sumitomo they control a majority of supply. I believe the number is often cited at 70% ish. But regardless, definitely framed as a 'majority'. So again the belief is that since they are the majority, then they must be relied on heavily from their customers.
But what the other execs from lumentum, coherent, AOI are saying is that they are doing just fine at this time with substrate capacity. Could they be fluffing this to paint a better picture? I guess. But taking their word for it, they are doing fine. And we know that AXT isn't shipping much right now, at least as of last earnings.
So where is it coming from? Sumitomo + whoever the other suppliers are.
Great you posted this. Sold my AXTI stocks at $40 (mostly because of the China angle and being in the chokehold of geo politics). Still, maybe a wrong decision to sell. Premature? Your post gives me some reassurance taking profits wasn’t the worst of decisions. There are a lot of beautiful photonics stocks left ;-)
I really don't know what happens in the short term, the stock could definitely keep going up. For me, it's not worth the risk at these levels. But ultimately I just wanted to provide my audience with any insight I had! Definitely plenty of opportunities out there
This is very good. The risks to AXTI are very real and cannot be ignored. I do think there is an excessive risk to China while holding this company, but in my opinion, the export restriction risk is already well understood and largely priced in at this point. If it isn't, then people haven't done their homework on this company. I also have a full deep dive coming, and I think the CPO inflection is the most underappreciated part of this story.
Thanks, took some profits 18 > 47 🔥
Bought Sivers with profits, thoughts?
thank you
You're welcome!
Great post . Could you please take a look at SIVE? Thanks
Hey Samar, yes I will be covering SIVE on this page. OFC is taking precedent this week but I will have coverage there.
Thanks
Personal take with enough analysis from the chain. Partially right, but issue is even if they can’t take prices up, they’ll be fully booked for a few years to come simply due to their small capacity size. When you have that demand visibility the stock isn’t priced inefficiently, it just needs time to be full priced.
Hey Henry, yeah I think the biggest questions for me are:
1 - When can they actually get permits?
2 - How much capacity can they ramp to to justify their valuation?
3 - How much demand is left by the time they get up to capacity & are allowed to ship
Thats what I will be tracking
Great questions, have enjoyed enough of your analysis to try and provide inputs.
1 - unsure, never will be sure on anything regulatory related in China.
2 - well let’s do math. 3Q25 mgmt call said they can do $20mn worth of InP (per quarter), since then indium prices / 7N InP have went up 40%. Take out CNH appreciation and just say 35%, 20*1.35 = 27mn a Q. They said they’re on track to 2x capacity by 2H26 and double again in 27, conservative guide tells me by EOY 27 they CAN do 108mn per Q of InP revenues. 400mn rev is <5x fwd PS, cheaper than LITE.
3 - LITE / COHR said post the NVDA investment that they locked up Sumitomo’s supply for the next 7 years. Generally a good sign of demand beyond 2-3 years. If Jensen says we need a lot more demand I’ll give it to em. 100mn per Q isn’t a lot in the semi space, especially for physically constraining materials.
TL;DR - mgmt conservative math says this is cheaper than LITE, demand prob okay. Unsure on permit timing.
So your thinking bull case is 400m annual rev for 2028?
For InP
Think that’s more base-bull case. Given I did give 40% premium to InP substrate price
That'd be solid. What do you see Lumentums 2028 revenue being?
Isn't the article contradictory? There are 2 main suppliers AXTI and Sumitomo .... But then COHR and AAOI now have multiple suppliers?
Hey @openrouter , great observation/question! So that's part of this whole thing. When I said it is 'framed' this was is because that's exactly right.
This is a direct quote from AXT's latest earnings call:
"And, you know, there's not – how many suppliers are there? You know the answer to that. two, and we're one of them, so."
So myself, and many others, took this to believe that between AXT and Sumitomo they control a majority of supply. I believe the number is often cited at 70% ish. But regardless, definitely framed as a 'majority'. So again the belief is that since they are the majority, then they must be relied on heavily from their customers.
But what the other execs from lumentum, coherent, AOI are saying is that they are doing just fine at this time with substrate capacity. Could they be fluffing this to paint a better picture? I guess. But taking their word for it, they are doing fine. And we know that AXT isn't shipping much right now, at least as of last earnings.
So where is it coming from? Sumitomo + whoever the other suppliers are.
I guess there is public and private ones.
But then why is AXTI stock price being pumped up as if it was the majority supplier
I guess because they are the most obvious and US traded player
Thanks for the update
Youre welcome!
I thought the stock was gonna sell off and it surges 20% holy shit!
I meant it when I said this wasn’t a top a signal😅
Markets could be extremely forward looking and I never underestimate investors risk tolerance.
I’d never short a stock like this. But there is a level that I just cant justify given the information I have, for my port
You have been so early to this photonic trade. Congrats!!
Thanks Lister! Still plenty in the tank on the right names
Great you posted this. Sold my AXTI stocks at $40 (mostly because of the China angle and being in the chokehold of geo politics). Still, maybe a wrong decision to sell. Premature? Your post gives me some reassurance taking profits wasn’t the worst of decisions. There are a lot of beautiful photonics stocks left ;-)
I really don't know what happens in the short term, the stock could definitely keep going up. For me, it's not worth the risk at these levels. But ultimately I just wanted to provide my audience with any insight I had! Definitely plenty of opportunities out there
This is very good. The risks to AXTI are very real and cannot be ignored. I do think there is an excessive risk to China while holding this company, but in my opinion, the export restriction risk is already well understood and largely priced in at this point. If it isn't, then people haven't done their homework on this company. I also have a full deep dive coming, and I think the CPO inflection is the most underappreciated part of this story.
Hey Nate, thank you! Yes definitely anyone that invests here should hopefully understand the geopolitical angle. Look forward to your deep dive!