Spotlight Stock: CPO Commercialization Accelerates, AXT Soars, Driving United Epitaxy and IET-KY to Limit-Up Gains

Amid market speculation over rising prices for indium phosphide (InP) substrates and epitaxial wafers, AXT (AXTI-US), the world's largest InP substrate supplier, surged 17.55% on Monday (17th), following NVIDIA's (NVDA-US) announcement that its CPO (co-packaged optics) switches for inter-rack scale-out are now in mass production. This momentum triggered a limit-up surge on Tuesday (18th) for InP-related stocks in Taiwan, including United Epitaxy (3081-TW) and IET-KY (4971-TW).

Analysts point out that, as warned by major optical communications company Lumentum (LITE-US), AI-driven demand for InP lasers has multiplied, creating supply shortages more severe than those seen in memory chips. Global optical communications giants are securing supply by signing long-term contracts with AXT, the leading substrate provider. As a result, InP substrates have already undergone three price increases since Q4 2025, while epitaxial wafers have seen two, with further hikes expected in the coming quarters.

In trading, United Epitaxy opened higher and climbed to a limit-up during the session, reclaiming the 3,000 TWD mark and reaching its highest level in nearly two months. The company reported a net profit of NT$786 million in the first half of 2026, a 465% year-on-year increase, with earnings per share (EPS) at NT$7.75. This growth was primarily fueled by the AI server deployment boom. With ongoing capacity expansions at both United Epitaxy and its downstream contract manufacturers, shipments of silicon photonics products are expected to continue rising.

Meanwhile, IET-KY (Interlex) posted consolidated revenue of NT$693 million in the first seven months of the year, up 18.78% year-on-year. The massive buildout of AI data centers has boosted demand for high-speed optical transceivers and optical communication infrastructure. The company's core InP-based products are expected to see even greater volume shipments this year. Analysts note that the expansion of its new facility in Texas, USA, has entered the installation phase and is expected to be completed by the end of 2026 to early 2027, potentially becoming a key production base for optical communications.