$AXTI $MRVL $LITE AXT's role in the AI supply chain looks more interesting to … · @carrioresearch · TwKit

@carrioresearch

$AXTI $MRVL $LITE AXT's role in the AI supply chain looks more interesting to me after the October 30 selloff. The company had just reported a 56% GAAP gross margin for Q3. The next phase of the optical buildout will test how much of that profitability it can retain. Bloomberg reports that Marvell is in advanced talks to buy Lumentum. The prospect of a chipmaker owning more of the laser supply chain puts a spotlight on what those lasers need upstream. Lumentum already has an agreement with AXT to reserve indium phosphide substrate capacity through 2031, including an initial $43.5 million deposit. The InP wafers AXT supplies are the starting material for those laser devices. A more integrated customer could help fund AXT's expansion while bargaining harder over substrate prices. AXT's negotiating strength will depend on how reliably it supplies qualified material and how easily customers can switch to alternatives. Those factors will help determine whether higher shipments translate into sustained earnings growth as competing capacity comes online. That's the valuation question I revisit in AXT, Round 2 👇

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