Shares of Coherent Corp. tumbled 6.7% to $356.86 on May 18, extending post-earnings weakness as investors weighed renewed fears that China's restrictive export controls on indium and rare earth minerals could squeeze the very materials at the heart of the company's AI networking business. The selloff erased $25.59 per share in a single session, underscoring how quickly a geopolitical headline can rattle even the hottest growth story in photonics.
Indium Is Not Just Another Input — It's the Backbone of Coherent's Product Line
Coherent controls its entire value chain, from advanced materials like indium phosphide and silicon carbide to finished optical modules.
Management itself acknowledged that "the industry-wide constraint in indium phosphide" makes capacity expansion "one of our highest priorities."
China's earlier controls on indium and other strategic minerals issued in 2025 remain intact , and the White House confirmed Beijing will "address U.S. concerns regarding supply chain shortages related to… indium" — a sign the problem is far from resolved. Any sustained bottleneck in raw indium supply could slow Coherent's aggressive ramp of its new 6-inch wafer line in Texas, the very facility meant to lower chip costs and outpace rivals.
The Q3 Numbers Were Good — But Not Good Enough to Absorb a Scare
Coherent reported Q3 earnings of $1.41 per share, missing estimates of $1.43 by $0.02.
Revenue hit $1.81 billion versus consensus of $1.78 billion , and non-GAAP EPS grew 55% year over year. Strong, but not bulletproof — the stock had already slid 2.7% after the May 6 report. Today's supply-chain headline gave sellers a fresh reason to take profits off a stock that rallied from ~$374 to ~$405 in just three sessions prior.
Coherent's Domestic Bet Is a Buffer — But Not a Guarantee
The company expects to double its internal indium phosphide output capacity by the end of 2026, one quarter ahead of schedule, and plans to more than double capacity again by the end of 2027.
Coherent has also secured tens of millions in CHIPS Act grants to expand domestic manufacturing. That insulates some production, but raw indium still largely originates from China. For 19 out of 20 strategic minerals, China is the leading refiner, with an average market share of 70%.
Analyst Targets Say Buy the Dip — The Market Isn't So Sure
Stifel and Rosenblatt carry price targets of $420 and $425, respectively , implying over 17% upside. But at ~$357, the stock now sits below several freshly raised targets, reflecting a market that is pricing in real supply risk, not just noise. Investors face a binary question: Is Coherent's vertical integration strong enough to weather a prolonged materials squeeze, or has geopolitics introduced a cost variable that even record backlogs cannot offset?