AXT Inc (AXTI) experienced a significant rise of over 19% on Monday following the announcement of a three-year supply agreement with Coherent Corp (COHR).
Details of the Supply Agreement
The partnership involves AXT's subsidiary, AXT-Tongmei, supplying 6-inch indium phosphide wafer substrates to Coherent until June 2029. The deal will commence on June 25, with Coherent making a prepayment of $22.3 million aimed at expanding manufacturing capacity at AXT's facility in Beijing between 2026 and 2028.
The prepayment will be used to cover future wafer purchases at pre-determined prices. Both parties have conditions in place: if Coherent does not meet minimum order thresholds, the prepayment becomes nonrefundable, and AXT retains the option to terminate the agreement.
Conditions and Strategic Implications
Conversely, if AXT does not reach its production targets for six consecutive months, Coherent may exit the deal and recover any unutilized prepayment.
The contract also gives Coherent priority access to any additional manufacturing capacity AXT develops beyond the agreed amount at the same pricing terms. This agreement was officially filed in an 8-K report, and standard clauses regarding confidentiality and warranties were included.
Indium phosphide wafers are essential for optical and communications technologies, positioning Coherent as a long-term client.
Market Reaction and Stock Performance
Following the announcement, Coherent's shares also saw growth, climbing about 3.9%. For AXT, this price jump on Monday contributes to an already impressive 297% increase in stock value year-to-date, with a staggering 2,383% rise over the past 12 months.
Trading volume during this surge reached around 2.6 million shares, which is notably lower than the three-month average of 9.39 million, indicating that the significant price change occurred with relatively light trading activity.
This joint venture isn't AXT’s only recent development; the company has also secured a supply agreement with Nanjing Casela Technologies effective June 2026. Analysts are cautiously optimistic about AXT, with a consensus rating of Moderate Buy based on three Buy recommendations and two Holds. The average price target for AXTI is set at $92.50.
