10 Small Publicly Traded Semiconductor Companies To Buy

7. AXT, Inc. (NASDAQ:AXTI)

Number of Hedge Fund Investors In Q1 2024: 19

AXT, Inc. (NASDAQ:AXTI) is a key backend semiconductor equipment provider since it provides substrates that chip manufacturers use to print the circuits on and make the end product. A diversified firm, its products are used in data centers, power management, communications, solar, and autonomous applications. This means that AXT, Inc. (NASDAQ:AXTI) remains insulated from a downturn in one industry provided that other sectors continue to perform well. Its two key products are based on Indium and Gallium phosphides, and both are used to manufacture key products for AI and satellites. This means that as the demand for AI products grows, AXT, Inc. (NASDAQ:AXTI) might benefit since its products enable AI servers to transfer data at high speeds – a non negotiable component of an AI data center’s performance.

These trends appear to be already playing out in the market as AXT, Inc. (NASDAQ:AXTI)’s management share during its latest earnings call:

We review AI as an exciting catalyst for Indium phosphide in the years to come. As AI requires high-speed lasers and detectors for rapid data transfer with increased bandwidth, low attenuation and low distortion. Today, AI applications are primarily oxide pixels, which require a relatively small amount of substrate material. But as the industry moves to 800 gig and then 1.6 terabyte speed, we expect that there will be a necessary transition to indium phosphide. We are already seeing development work happening today with next-generation silicon photonics devices and electro-absorption modulated laser or EML for high-speed data center transceivers. Revenue from these applications contributed to our strong indium phosphide growth in Q1 and will help drive our expected growth in 2024.

Our gallium phosphide revenue grew 24% sequentially in Q1, reflecting increased demand across a broad base of applications, including power amplifiers, HPT applications for wireless our switches, high-power lasers and LEDs. We believe much of the excess inventory in the supply chain has been decided, and we are benefiting from a desire among our customers to diversify their supply base as the market recovers. For example, today, our share of the HPT market is relatively small, but we believe we have a great opportunity to increase our market share over time and are pleased with early customer traction. In addition, our 8-inch gallium site development efforts have led to a groundbreaking advancements in both of our defect densities and yields.