GrowthTurtle
Data Science PhD & IEEE Fellow, Ex-Two Sigma
Aixtron is a mispriced European AI photonics play: it holds over 90% of the market for the MOCVD reactors that grow the indium phosphide crystals used in AI data center lasers, so every laser in Nvidia or Broadcom optical transceivers starts in its machines. Customers include Coherent, Lumentum, Nokia/Infinera and SMART Photonics, and laser lead times stretch past 2027. Despite a significant re-rating, it trades at 38x EV/EBITDA versus 84x for peers like BESI. x.comÂ
Aixtron is a decent proxy play on photonics because it basically has a monopoly on its indium phosphide equipment, while the photonics names are capacity constrained and InP remains an ongoing bottleneck. x.comÂ
Aixtron and Veeco will probably never see their old highs again, because semiconductor equipment makers look stretched above about 11x price-to-sales. Fifteen years of software multiple expansion have conditioned investors to accept high multiples, but equipment makers have very different margin structures. The broader bull market is still far from over even though fundamentals look overheated, with momentum doing the heavy lifting. x.comÂ
Aixtron's indium phosphide business is grossly under-modeled, as MOCVD machines may become the gating factor for scaling co-packaged optics. It holds 90%+ share in InP, a rare monopoly in optics and power chips. GaN and SiC markets will reach tens of billions and capacity will run out once new data centers adopt 800V DC, so even a fraction of that in MOCVD demand means billions of revenue for a $6 billion company. CPO and 800V DC each have three ramp phases, each half an order larger. x.comÂ
InP substrate demand and pricing still support the AI optics supply chain. Yunnan Germanium reports higher InP volumes from AI data centers and optical communications, plus higher prices. Q3 revenue rose 134.6% year on year, near AXT's guided 136%, but also includes germanium. IQE's H1 photonics grew 45%, partly from US defense funding. AXT's $66m Q3 guide covers only licensed exports or sales needing no license; a miss would more likely reflect licensing. x.comÂ
Aixtron is not a buy at the current price because the stock is expensive. x.comÂ
Aixtron's position is durable but not unconstrained, with optical lasers carrying the near-term case: it holds over 90% of InP MOCVD and every high-speed laser traces back to its reactors. Its share will likely erode toward 65-75% by decade-end as Veeco improves and Chinese buyers diversify, manageable if the InP tool market doubles or triples. The bigger near-term limit is capacity, as Aixtron reallocates existing lines rather than adding aggressively. 800V DC power demand looks further off. … Show more
Aixtron and Veeco stand to benefit because indium phosphide is the real bottleneck in optical interconnect, one nothing else can replace. InP looks set to stay structurally short in both demand and supply over the next three to five years, a theme the market has not yet fully priced, which makes both equipment makers attractive. x.com x.comÂ
Applied Optoelectronics should trade above $150, in part because Lumentum's CEO says its optical components are sold out through early 2029 and it cannot meet roughly 70% of demand for some products through 2027. That industry signal strengthens the case for AAOI's expanding 800G/1.6T offerings after completion of its $600M ATM, with shares around $110. x.comÂ
AXT is a speculative add on the market's sharp drop, because indium phosphide wafer prices have reportedly risen a lot lately. x.comÂ