Bull of the Day: AXT (AXTI)

AXTI reported record second-quarter 2026 revenue of $47.6 million, up 165% year-over-year, driven by demand for indium phosphide substrates used in AI data-center optical interconnects. The semiconductor substrate maker posted gross margins of 44.9% and beat EPS estimates by 170%.

The company is scaling aggressively to meet AI infrastructure demand. AXTI holds a backlog exceeding $100 million and plans to expand quarterly capacity to $35 million by the end of 2026, then to $65-70 million by 2027 or early 2028. The firm is also advancing toward 6-inch wafer production, a technical upgrade that signals its shift from cyclical substrate supplier to critical AI infrastructure vendor.

Zacks Investment Research flagged the stock as its Bull of the Day, citing the capacity ramp and AI positioning. The thesis hinges on sustained optical interconnect demand as hyperscalers expand data centers, but risks include potential cooling in AI optical spending, China export restrictions, and the sustainability of gross margins above 40% as the company scales.