AXT Inc. (NASDAQ:AXTI), a leading provider of compound semiconductor substrates, witnessed its share price soar by 19.8% to $97.79 per share, a two-month high, as investors scrambled to purchase shares following news that prices of indium phosphide (InP) could surge by 10% by the end of the year.

A report by financial services firm Nomura, citing two industry experts, revealed that prices of two-inch InP substrates have already jumped by as much as 76% to 880 yuan per wafer from 550 yuan in just the first six months of the year. In the same period, prices of three-inch wafers climbed by 78% to 3,200 yuan from 1,800 yuan.

The surge in InP prices is attributed to the ongoing supply crunch in the industry, which is being driven by the rapidly growing artificial intelligence buildout. The supply crunch has led to a shortage of InP substrates, driving up prices and sparking concerns among industry players.

Industry Experts Weigh In

Industry experts believe that the price hike will have a significant impact on the supply chain, with some predicting that prices could rise by as much as 10% in the fourth quarter of the year. This has sparked rosy growth prospects for industry players, including AXT Inc. (NASDAQ:AXTI), which has already secured two new supply deals with optical and photonics manufacturers, Lumentum Holdings and Coherent Corp.

In June, Coherent agreed to prepay AXT Inc. (NASDAQ:AXTI) as much as $22.3 million to support an expansion of six-inch InP substrate capacity at the supplier’s Beijing facility between 2026 and 2028. Lumentum followed with an $87 million agreement reserving InP capacity for the next five years.

Analysts Predict Strong Growth

Analysts at Needham, Wedbush, Northland, and Craig-Hallum have all assigned a buy recommendation to AXT Inc. (NASDAQ:AXTI), citing the company’s strong fundamentals and growth prospects. B. Riley, however, issued a more conservative hold call.

Data from Insider Monkey showed that the number of institutional investors establishing exposure in the stock grew to 37 in the first quarter of the year from 34 in the fourth quarter of 2025. More importantly, their convictions increased by 78% to $363.7 million from $204 million year-on-year.

Conclusion

In conclusion, the surge in InP prices has sent shockwaves through the industry, with AXT Inc. (NASDAQ:AXTI) being one of the key beneficiaries. As the industry continues to grow and demand for InP substrates increases, investors are likely to continue to flock to AXT Inc. (NASDAQ:AXTI), driving up its share price.