S&P 600 funds had to buy AXT at 4,080x earnings. Insiders sold $70 million.
Index trackers were obliged to hold AXTI at a $5.18 billion valuation standing on three cents of trailing earnings. The indium phosphide ramp is real, and the people closest to it kept selling.
Vincent Jiang · 3 min read
On 21 September 2026, every fund tracking the S&P SmallCap 600 became a holder of AXT, the Fremont substrate maker whose indium phosphide wafers sit inside the lasers that move data between AI chips. S&P Dow Jones Indices announced the addition on 16 September, with AXT replacing Matthews International 1. The stock closed up 11% at $64 that day 1, rose as much as 16.4% intraday to $81.50 on inclusion day before closing up 14.14% 23, then slipped the next session as traders banked the event 3.
Trackers became holders at 4,080 times earnings
What the trackers absorbed: a $5.18 billion market value standing on three cents of trailing earnings, a trailing multiple of 4,080, and a fiscal year that ended in a $21.3 million loss on $88.3 million of revenue 4. The same stock traded as low as $4.03 within the past 52 weeks 5.
The record quarter that earned the seat
The seat was earned, not gifted. Second-quarter revenue hit a record $47.59 million, gross margin climbed to 44.9%, and AXT booked $11.1 million of net income, its first profitable quarter in the eight on file 6. Indium phosphide alone contributed $30.7 million 1.
The run-rate the market has already paid for
Seven quarters near $24M, then a record $47.6M
Data
| Revenue | |
|---|---|
| Q3 '24 | $23.65M |
| Q4 '24 | $25.11M |
| Q1 '25 | $19.36M |
| Q2 '25 | $17.97M |
| Q3 '25 | $27.96M |
| Q4 '25 | $23.04M |
| Q1 '26 | $26.92M |
| Q2 '26 | $47.59M |
Gross margin swung from minus 6.4% to 44.9% in five quarters
Data
| Gross margin, % of revenue | |
|---|---|
| Q3 '24 | 24% |
| Q4 '24 | 17.6% |
| Q1 '25 | -6.4% |
| Q2 '25 | 8% |
| Q3 '25 | 22.3% |
| Q4 '25 | 20.9% |
| Q1 '26 | 29.6% |
| Q2 '26 | 44.9% |
Backlog tops $100 million, supply agreements with Coherent, Casela and Lumentum carry cash prepayments, and management points to a run-rate near $130 million a quarter by the end of 2027 1. Needham upgraded the stock to Buy at $90 in July and names AXT a winner of the co-packaged optics transition; Northland carries $125 7.
Three cents of earnings under a $5.18 billion market
The closest holders were selling
Form 4 filings logged more than $70 million of insider sales across 2026 8. Chief executive Morris Young sold 197,498 shares at $112.98 on 1 June, six days after the stock hit its all-time high of $143.16 on 26 May 84. Chief financial officer Gary Fischer sold 405,233 shares on 2 March, 59% of his holding 8.
Quiver counts sixteen open-market insider sales in the past six months and zero purchases 3. The only insider buy on the tape is Young's 30,000 shares at $1.36, in February 2025 8. The filings record the sales, not the reasons.
Institutions split the same way. BlackRock added 3.95 million shares in the second quarter and D. E. Shaw 1.8 million, while Davidson Kempner, E20 Capital, WT Asset Management and Anther Capital exited entirely 3. Hedge fund holders fell from 37 to 33 even as committed capital rose 34% to $487.9 million 2.
The test lands on 29 October
AXT reports on 29 October 4. The tell is the indium phosphide line against the $130-million-a-quarter run-rate management has pointed to for the end of 2027 1. At $78.94, the market has already paid for that ramp arriving on schedule 4. The index funds had no choice. The insiders did.
How this brief was made
01Gathered & sourced397 channels · 2,198 articles▾
Agents swept 397 channels and ingested 2,198 articles, then de-duplicated and ranked them for signal.
02Verified & cross-validated8 claims · 20 data feeds▾
Every one of 8 load-bearing claims was checked against primary sources, with 20 live data feeds reconciling the figures and charts.
- 1Yahoo Finance (TIKR), AXTI Stock Jumped 11% Yesterday. The Index Nod Wasn't the Whole Story, 17 September 2026
- 2Yahoo Finance (Insider Monkey), AXT Inc. (AXTI) Climbs 16% on S&P 600 Addition, 21 September 2026
- 3Quiver Quantitative, AXT slips as traders appear to take profits after an index-driven surge, 23 September 2026
- 4TradingView, AXT Inc stock profile and quote data, NASDAQ:AXTI, collected 27 September 2026
- 5AInvest, AXT Inc Leads Market in Turnover as AI Chip Demand Fuels Record Earnings, 24 September 2026
- 6Sharadar quarterly fundamentals, from AXT Inc's SEC filings, retrieved 28 September 2026
- 7Yahoo Finance (GuruFocus), AXT Rises 10% After Being Named Co-Packaged Optics Winner, 16 September 2026
- 8OpenInsider, AXTI SEC Form 4 insider trading screener, retrieved 28 September 2026
03Reviewed & edited1 human editor▾
One editor read the draft against the evidence, tuned the framing, and signed off before it shipped.
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