Key Highlights

  • AXT closed at USD 92.44 on June 22, up 9.31%, with volume near 11.90 million shares.
  • AXTI traded at USD 83.03 pre-market on June 23, down 10.18% from the latest close.
  • AI optical-connectivity demand remains supportive, but valuation, China exposure and export-permit risks are driving volatility.

Why the Stock Is Falling Pre-Market

AXT, Inc. (NASDAQ:AXTI) dropped 10.18% in June 23 pre-market trading, falling to USD 83.03 after closing at USD 92.44 on June 22.

The decline partly reversed the previous session’s 9.31% rally. Investors appeared to take profits after the stock had risen sharply on expectations for stronger indium phosphide wafer demand from artificial intelligence data centres.

The broader semiconductor sector was also under pressure in early trading, adding to the reversal. Higher Treasury yields and cautious interest-rate expectations reduced appetite for richly valued technology stocks.

The move therefore appears less connected to a deterioration in AXT’s underlying demand outlook and more to a reassessment of valuation after a rapid price increase.

AI Demand Has Repriced the InP Business

AXT manufactures compound semiconductor substrates, including indium phosphide, gallium arsenide and germanium wafers.

Indium phosphide is particularly important for high-speed optical communications. AI data centres require faster connections between servers, networking equipment and computing clusters, increasing demand for optical components capable of moving large volumes of data efficiently.

AXT’s Tongmei subsidiary recently secured a reported USD 25.4 million indium phosphide wafer supply agreement with Nanjing Casela Technologies for delivery in 2027.

The agreement reportedly includes an 80% minimum take-or-pay commitment, giving AXT greater revenue visibility than a conventional purchase order.

That contract supported the prior-session rally, but the pre-market decline suggests investors are questioning how much future growth is already reflected in the share price.

Board Appointment Strengthens China and Governance Expertise

AXT also appointed Tracy Liu to its board, expanding the board to five directors.

Liu brings more than three decades of experience in accounting, international tax, cross-border operations and semiconductor-sector governance. Her background includes advising businesses operating across the United States and China.

That experience is relevant because AXT’s Tongmei subsidiary and much of its manufacturing infrastructure are based in China.

The appointment may improve oversight of regulatory, tax and cross-border issues, but it is unlikely to be the primary driver of the latest stock move.

Valuation Has Become the Central Risk

At the June 22 close, AXT had a market capitalisation of approximately USD 4.29 billion.

The company reported EPS of about negative USD 0.32 and does not have a meaningful trailing P/E ratio. The stock’s 52-week range of USD 1.85 to USD 143.16 also illustrates extreme volatility.

At recent levels, AXT was reportedly trading at a price-to-sales ratio near 46 times. That valuation requires substantial future revenue growth and strong margin expansion.

If AI optical demand grows more slowly than expected, or if customer orders are delayed, the stock could face further multiple compression.

China Exposure Adds Strategic Complexity

AXT benefits from its manufacturing scale and raw-material relationships in China, but that structure also creates regulatory and geopolitical risk.

The company depends on export permits for certain indium phosphide and other wafer products. Delays or restrictions could affect shipments, customer relationships and revenue timing.

AXT must also manage US-China trade tensions, regulatory requirements involving Tongmei and the planned listing of its subsidiary on China’s STAR Market.

These risks may become more important as investors assign a higher valuation to the company’s AI-linked growth opportunity.

Liquidity and Trading Dynamics

AXTI traded about 11.90 million shares during the June 22 session, indicating substantial market participation in the rally.

The following pre-market reversal suggests that momentum investors and short-term traders were reducing exposure after the strong gain.

Pre-market trading remains less liquid than the regular session, so the size of the decline may change once full market participation returns.

What Investors Are Watching Next

Investors will watch the Nanjing Casela contract, customer order growth and capacity expansion for indium phosphide wafers.

Markets will also focus on export permits, Tongmei’s regulatory progress, gross margins and whether AI data-centre demand can support the company’s elevated valuation.

Conclusion

AXT’s 10.18% pre-market decline reflects a sharp valuation reset after the stock’s AI-driven rally.

The company remains exposed to a powerful structural theme through indium phosphide demand for optical data transmission. However, the combination of a loss-making financial profile, high valuation and China-related regulatory risk leaves the stock sensitive to profit-taking and broader semiconductor weakness.