Oct 16, 2026: a sector selloff with no company news
The stock opened premarket trading at $59.31 at 4am and touched $59.87, above the prior close, before selling set in. It was $56.35 just before the bell. It opened at $56.23, which was also the high of the regular session at $56.58, and then slid through the morning. A bounce to $56.28 at about 10:40am faded, and the stock fell to $52.32 in the 12:45pm trading window. At 12:50pm it was $52.48 on 5.2 million shares.
What pushed it down:
- Chip stocks kept falling. Yahoo Finance reported that 57 of the 60 stocks in its semiconductor basket were down and that SOXX was set for a ninth straight loss. SOXX had fallen 14.7% from its Oct 5 close by 12:50pm.
- Optical networking stocks fell harder. AXT sells indium phosphide wafers used to make the lasers inside data center optical links, so it trades with those makers. Applied Optoelectronics, Coherent and Lumentum fell 4% to 7%.
- Tech selling spread beyond chips. Yahoo Finance said 41 of 45 stocks in its software basket fell, the Nasdaq 100 was down 1.4% at midday, and investors moved into health care and financial stocks. CoreWeave's debt worries kept pressure on the AI trade.
- Rates stayed high. The 10-year Treasury yield was near 5.07%. A hot September inflation report on Oct 14, with headline inflation at 3.7% against a 3.6% estimate, kept a Fed rate hike this month in play; futures markets put the odds near 15% on Oct 16, down from 33% before that report.
- No AXT filing, release or rating change. EDGAR shows the last AXT filing was a Schedule 13G/A on Oct 5. The last analyst rating change on record was Needham's upgrade to Buy on July 31.
At 12:50pm:
| Stock or fund | Oct 15 close | Oct 16, 12:50pm | Change |
|---|---|---|---|
| AXT (AXTI) | $57.91 | $52.48 | -9.4% |
| Aehr Test Systems (AEHR) | $69.21 | $63.49 | -8.3% |
| MaxLinear (MXL) | $78.18 | $72.25 | -7.6% |
| Cohu (COHU) | $54.90 | $50.83 | -7.4% |
| Applied Optoelectronics (AAOI) | $83.73 | $77.65 | -7.3% |
| Coherent (COHR) | $250.60 | $235.77 | -5.9% |
| FormFactor (FORM) | $113.34 | $107.28 | -5.4% |
| Lumentum (LITE) | $869.54 | $833.51 | -4.1% |
| iShares Semiconductor ETF (SOXX) | $514.71 | $502.80 | -2.3% |
| VanEck Semiconductor ETF (SMH) | $558.84 | $548.29 | -1.9% |
AXT fell four to five times as much as the chip ETFs but only a point or so more than the smaller test and optical names. That pattern fits a high-volatility stock in a falling group, not a company problem. A 17.2% short float, can add to swings in both directions; our guide to short interest and days to cover explains why.
After the drop, RSI(14) stood at 34, the shares sat 26% below their 50-day average and 17% below their 200-day average, volume by 12:50pm was 0.6 times its 20-day average of 8.9 million shares, and the stock was 63% below its 52-week high.
How the slide built over two weeks
This is not the first leg down. AXT fell 10.2% to $71.66 on Oct 8, when Coherent fell 9.6% in a broad optics selloff, and TIKR noted there was no AXT news that day either. On Oct 14 the hot inflation report hit optical stocks again; Applied Optoelectronics fell 11.8% and Coherent and Lumentum 9% each, per TIKR. AXT closed lower on seven of the eight sessions after Oct 5. The only up day was Oct 13, a 4.3% gain to $64.63.
The stock had run hard before that. It closed 2025 at $16.35 and peaked at $143.16 on May 26, 2026, so even at $52.48 it is up about 220% for the year.
The numbers behind the business
The second quarter, reported July 30, was the strongest in the company's history.
| Measure | Q2 2025 | Q1 2026 | Q2 2026 |
|---|---|---|---|
| Revenue | $18.0M | $26.9M | $47.6M |
| GAAP gross margin | 8.0% | 29.6% | 44.9% |
| GAAP net income (loss) | -$7.0M | -$1.6M | $11.1M |
| Non-GAAP EPS | -$0.15 | -$0.01 | $0.19 |
Substrate revenue rose 233% from a year earlier to $37.6 million, per the 10-Q. CEO Morris Young said the company had reached "an inflection point" driven by "strong customer demand for data center optical connectivity." On July 29 AXT signed a supply agreement with Lumentum running through 2031, with two deposits of $43.5 million each, the first due within 30 business days of signing and the second timed during 2028.
The balance sheet gives it room. AXT held $748.8 million of cash and investments at June 30, mostly from an April stock offering, per TIKR and Zacks. Inventory rose 18% in the first half to $96.3 million, which Zacks flagged as a working capital strain.
The bull case
- Demand is ahead of supply. Barchart reported that Lumentum said on Oct 12 it is sold out of components through 2029, and Wedbush called that bullish for AXT. AXT's own filings describe a backlog of orders waiting on export permits.
- Estimates have climbed. TIKR said analysts more than doubled their 2027 revenue estimate between June 30 and September 30, to about $461 million. The analyst consensus for 2027 is $482.5 million.
- Targets sit well above the price. The analyst consensus target is $99.50, with a low of $90. Even the low is 71% above the 12:50pm price.
The risks
- Export permits. China added indium phosphide substrates to its export control list on February 4, 2025. AXT makes its wafers in China, and its 10-Q says "InP export permits represent the most significant challenge we currently face," adding that it "cannot predict when a permit application will be reviewed and approved." For how timing risk like this gets priced, see our explainer on regulatory approvals as catalysts.
- A November deadline. China's suspension of its October 2025 export control package runs until November 10, 2026, and its pause on the ban of gallium and germanium exports to the US runs until November 27, 2026, per Pillsbury. Its controls on indium-related items stayed in force throughout. A lapse would raise the policy risk for the whole supply chain.
- China concentration. Shipments to customers in China were $30.8 million of the $47.6 million second-quarter revenue, or 65%, per the 10-Q.
- Valuation. At 27.4 times trailing sales, the price assumes the growth arrives on schedule. Our guide to the price-to-sales ratio covers why high multiples fall hardest when a sector sells off.
- Rates. A Fed hike at the October meeting would add pressure to the long-duration growth stocks AXT trades with.
What comes next
- The Fed decision on October 28. Yahoo Finance noted that the next PCE inflation report arrives the day after the decision. A hike would test the whole group.
- Third-quarter results on October 29. The consensus is about $66 million of revenue, per TIKR. Watch revenue against that figure, gross margin against 44.9%, and what management says about export permits and fourth-quarter demand. Our guide to preparing for an earnings report explains what moves a stock on the day.
- The SOXX losing streak. A break in the run of daily losses would be the first sign the sector selling has eased. AXT has followed the group in both directions.
- China's November deadlines. Any word on extending the export control pauses past November 10 and November 27 would ease one of the larger policy risks.