Shares of AXT Inc. tumbled 8.75% to $39.11 on Wednesday, extending a brutal week that has erased roughly 26% of the stock's value since last Tuesday's close of $52.98. The slide accelerated after B. Riley Securities cut its price target from $73 to $52 — a 29% reduction — while maintaining a neutral rating, signaling the analyst sees limited near-term upside even at these depressed levels. AXT's AI-Fueled Rally Hits a Wall as B. Riley Cuts Its Target by 29% — Is the Indium Phosphide Thesis Still Intact?
Shares of AXT Inc. cratered 8.75% to $39.11 on July 29, deepening a weeklong rout that has wiped out roughly 26% of the stock's value since July 22. The drop compounds a sector-wide meltdown — the iShares Semiconductor ETF (SOXX) has fallen approximately 25% from its June 22 peak — but AXT faces a company-specific headwind: B. Riley slashed its price target from $73 to $52, a 29% cut, while keeping a neutral rating. The timing is acute: AXT is scheduled to report second-quarter 2026 earnings tomorrow, July 30.
A Sector Rout Is Dragging Down a Stock That Was Already Stretched
Semiconductor stocks were untouchable in the first half of 2026 — the Philadelphia Semiconductor Index gained nearly 65% in six months. AXT rode that wave harder than most; shares had rallied approximately 700% in recent months on the thesis that its indium phosphide wafers are essential for high-speed optical links inside AI data centers. With the company valued at more than 10× estimated 2026 sales earlier this year, strong prospects appeared largely priced in. B. Riley's reset acknowledges the gap between that growth promise and today's reality.
China Export Permits Remain the Wild Card
China added indium phosphide to its export control list on February 4, 2025, requiring AXT to secure government permits for each overseas shipment — creating unpredictable revenue swings. Q1 revenue of $26.9 million beat guidance only because permits came in slightly better than expected. With all three of AXT's factories in China, export permit timing remains a key risk that no analyst model can reliably forecast.
A Big Bet on Capacity That Hasn't Yet Paid Off
AXT completed a $632.5 million capital raise to expand indium phosphide capacity at its Chinese subsidiary, Tongmei.
The company plans to double capacity by year-end 2026, targeting a $35 million quarterly indium phosphide revenue run rate. That is ambitious for a company that generated just $26.9 million in total revenue last quarter. If demand materializes and permits flow, the payoff is substantial; if either stalls, shareholders absorb the dilution with little to show.
Tomorrow's Earnings Could Reset the Narrative — or Deepen the Pain At $39.11, AXT now trades 25% below B. Riley's new target, suggesting the market is pricing in more bad news than the analyst. Management last reported an indium phosphide backlog exceeding $60 million — a record. Whether that backlog converts to shipped revenue hinges entirely on Beijing's permit desk. Investors should watch tomorrow's call for updated permit visibility and Q3 guidance; anything short of a clear ramp path could send shares lower still.