Indium phosphide substrate bottleneck in AI optical networks

Conviction: 74% · Horizon: 2Y · 2026-06-11
AI data center optical growth depends on scarce qualified InP substrate supply

Demand for AI networking is pulling more lasers, photodiodes, modulators and optical engines through a supply chain that starts with blank InP substrates. Capacity expansion is difficult because crystal growth, yield, qualification, export permits and multi-year supplier agreements can all limit how quickly downstream fabs can scale.

Instrument Side Target Reason
AXTI Long We believe qualified InP substrate suppliers can gain pricing power and long-term customer commitments as AI optical demand rises faster than wafer capacity, although export permit timing remains a material risk.
COHR Long We believe large-scale 6-inch InP production can create a cost and output advantage in high-demand AI optical components if substrate access remains sufficient to feed the ramp.
AAOI Long We believe vertically integrated laser and transceiver producers with diversified substrate sourcing can capture more margin during an InP constraint by reserving high-power lasers for internal module production.

Themes

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