AXT, Inc. AXTI has fallen below its 50-day simple moving average (SMA). This SMA is a widely used technical indicator that helps forecast future price trends, identify potential support and resistance levels, and generate clear buy or sell signals. The stock is currently trading at $50.46, well below its 50-day SMA of $94.53; this reflects a bearish trend and growing investor concern regarding short-term execution, despite favorable long-term industry trends.
The recent weakness is primarily caused by uncertainty surrounding export permits for indium phosphide (InP) shipments, which continues to delay revenue recognition despite record customer backlog and strong AI-driven demand. In addition, the company's aggressive capacity expansion requires significant capital spending, which may pressure near-term cash flow before these investments begin contributing meaningfully to earnings.
AXTI 50-Day SMA
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Reflecting these headwinds, AXTI shares have declined 19.8% over the past three months, underperforming the Zacks Electronics – Semiconductors industry's 21.8% gain and the broader Computer and Technology sector's 12.3% rise. AXTI has also lagged key peers such as Amkor Technology AMKR, Lam Research LRCX and Marvell Technology MRVL, whose shares have gained 10.6%, 24.3% and 60.9%, respectively, over the same period.
AXTI Three-Month Price Performance
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Given that AXTI is trading below its 50-day SMA and lagging behind industry peers such as Amkor Technology, Lam Research and Marvell Technology, investors might question whether this recent weakness signals deeper fundamental challenges or merely reflects temporary performance headwinds. Since technical weaknesses alone rarely provide a full picture of the overall situation, a closer look at AXTI's long-term growth drivers and valuation can help determine whether the recent pullback signals a warning or a prospect for long-term investors. Let us dig deep to find out.
AXTI's Optical Communications Push Drives Future Growth
AXTI's long-term growth opportunity is increasingly tied to the rapid expansion of optical communications infrastructure required for AI data centers. Management expects the optical components market to drive a four to six times increase in the Indium Phosphide (InP) substrate market over the next three to five years, fueled by both AI scale-out and scale-up architectures. To capitalize on this opportunity, AXT plans to double its InP capacity in 2026, double it again in 2027 with a dedicated production facility and continue expanding in 2028.
AXT is reinforcing its competitive moat through investments in 6-inch InP technology, proprietary crystal-growth capabilities and its vertically integrated raw-material supply chain, enabling the company to scale production efficiently as demand rises. Its materials are already used by multiple U.S. hyperscalers, with AI-driven optical networking demand expanding across both the United States and China. Alongside deepening relationships with Tier-1 optical component manufacturers and AI infrastructure customers, these capabilities position AXT to gain market share in the rapidly expanding optical communications ecosystem, providing a solid foundation for sustainable growth.
Record Backlog Provides Long-Term Revenue Visibility for AXTI
AXT is benefiting from a record Indium Phosphide (InP) backlog, enhancing revenue visibility as AI infrastructure investments accelerate. During the first quarter of 2026, the InP backlog surpassed $100 million, the highest in the company's history, supported by record customer forecasts and increasing order commitments. Customers are providing longer-term demand visibility and working closely with AXT in a supply-constrained environment, reflecting confidence in the company's manufacturing capabilities and strategic importance within the optical communications supply chain.
The strong backlog also underpins AXT's aggressive capacity expansion strategy. The company expects its largest-ever InP revenue quarter in the second quarter of 2026, driven primarily by AI-related demand for silicon photonics, optical transceivers and high-speed photodetectors. Management noted that discussions with major customers have progressed toward long-term supply agreements. Although export permit timing remains a near-term variable, the combination of a record backlog, expanding customer engagement and multi-year capacity investments strengthens confidence.
AXTI’s High Valuation Shows Opportunity
AXTI stock is overvalued at present, as suggested by its Value Score of F, and a forward 12-month price-to-sales (P/S) ratio of 18.44X, significantly above the industry average of 9.33X.
The stock is also trading at a higher price compared with its industry and closest peers, Amkor Technology, Lam Research and Marvell Technology, which have forward P/S multiples of 2.06X, 13.41X and 13.76X, respectively. AXTI stock’s high valuation is well supported by its expectations of massive AI-driven growth and the potential for multi-year growth in optical communications infrastructure, driven primarily by the increasing adoption of high-speed optical transceivers and silicon photonics, as well as the emergence of co-packaged optics (CPO), which creates more room to grow.
AXTI Stock’s Valuation
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Conclusion: Hold Position Remains Justified
Despite near-term technical weakness and export-related delays, AXT's record InP backlog, expanding optical communications opportunity and multi-year capacity expansion reinforce its long-term growth outlook. While the stock commands a premium valuation, it reflects the company's expanding market opportunity and future growth potential. Given the balanced risk-reward profile, retaining the stock remains justified rather than exiting the position.
AXT stock currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).