AXTI is now down >50% off ATH. What now?

Gaetano · Gaetano · June 26, 2026 at 12:03 · ⏱ 6 min read  | Read on Substack ↗
Summary
The article stress-tests whether AXT's 50% decline from its all-time high makes it a value, concluding that the key question is whether InP substrate scarcity can actually convert into revenue, margin, and shareholder returns after accounting for dilution, minority interests, and the Tongmei structure. For markets, it warns that strategic bottleneck narratives do not automatically translate into equity gains, especially when upstream TAM and rent capture are uncertain.
  • •AXT and Sumitomo together control ~80% of global InP substrate manufacturing (Sumitomo ~40%, AXT ~35%, JX ~10%).
  • •Q1 2026 revenue was $26.9M with GAAP gross margin improving to 29.6% from negative 6.4% a year earlier.
  • •6-inch wafer prices have risen ~250% to roughly $5,000 after China placed InP on its export-control list.
  • •New customer qualification for InP substrates typically takes three months to over a year.
  • •AXT's enterprise value is ~$4.5B, implying the market is underwriting a major future ramp despite current quarterly revenue of ~$27M.
  • •The 6-inch wafer transition is the critical margin lever: 2.25x the area of 4-inch, but execution risk on yield and qualification is high.
Read time 6 min
Length 6,666 chars
Category finance
Ideas
Gaetano Substack author, Gaetano
AXT holds ~35% of the global InP substrate market and benefits from scarcity caused by China's export controls. The 6-inch wafer transition could drive margin expansion if yield and qualification succ
AXT holds ~35% of the global InP substrate market and benefits from scarcity caused by China's export controls. The 6-inch wafer transition could drive margin expansion if yield and qualification succeed. However, the article highlights that valuation remains stretched at $4.5B EV on ~$27M quarterly revenue, and shareholder returns face dilution and structural risks. Risk: Execution risk on 6-inch ramp, customer concentration, and the Tongmei structure may limit value accrual to common shareholders.
AXTI
More from Gaetano
Those who can supply, win.
Jun 25, 12:01
Physical AI’s Local Brain: 3 Stocks I’m Watching
Jun 24, 15:29
If I Were To Build An Optics ETF. This Would Be It.
Jun 23, 19:12
Why is this stock going down?
Jun 22, 12:01
New Position: High Torque Physical AI
Jun 21, 13:27

This newsletter, published June 26, 2026, features Gaetano discussing AXTI. 1 trade idea extracted by AI with direction and confidence scoring.

Speakers: Gaetano  · Tickers: AXTI