Wedbush Securities identified China's first domestic near-packaged optics (NPO) multi-source agreement for artificial intelligence as a direct positive for AXT, Inc. The NPO standard places optical engines closer to chips to reduce power consumption in AI data centers. Analyst Matt Bryson characterized the development as both a validation of NPO architecture and a move toward Chinese technological autonomy.
AXT is expected to benefit due to its leading position in producing Indium Phosphide (InP) substrates within China. These materials are essential for the high-speed connectivity required by the new standard. Wedbush noted that China must interconnect a larger number of less advanced accelerators to match the performance of global competitors.
AXT shares fell 5.5% in premarket trading on Friday despite the optimistic long-term commentary.