Key Highlights

  • AXTI shares fell about 8% pre-market to $59.55, from $64.38 prior close.
  • Tongmei financing ranges from about US$285 million to US$545 million.
  • AXT would retain about 73.40% of Tongmei at the maximum raise.
  • Closing is expected in December 2026, subject to conditions.
  • Third-quarter results are due after the close today.

Tongmei Financing Details

AXT, Inc. (NASDAQ:AXTI) shares fell in pre-market trading after the company announced that its majority-owned subsidiary, Beijing Tongmei Xtal Technology, entered definitive agreements for a private equity financing. Institutional investors will invest a minimum of RMB 1.91 billion, about US$285 million, and up to RMB 3.67 billion, about US$545 million, in new Tongmei ordinary shares.

Proceeds will fund expansion of indium phosphide substrate capacity, capital expenditure and working capital, and will also increase capacity at AXT's raw material companies in China. AXT said demand for indium phosphide wafers is outpacing supply. At the maximum amount, AXT expects to keep control with about 73.40% ownership and to continue consolidating Tongmei.

The deal carries redemption rights, including if Tongmei does not complete a qualified initial public offering within three years, and AXT may have to support any redemptions. The lead investor is a leading Asian asset manager committed to helping Tongmei pursue an overseas listing. Closing is subject to customary conditions, including regulatory filings, and is expected in December 2026, with no assurance it will close.

Company Background and Valuation

AXT is a materials science company based in Fremont, California, that makes indium phosphide, gallium arsenide and germanium substrate wafers using its vertical gradient freeze technology. Its substrates serve AI and data centre optical connectivity, 5G, lasers, sensors, RF devices, LED lighting and satellite solar cells. Most manufacturing is done through Tongmei in China, and the company has about 1,500 employees.

AXT has a market capitalisation of about $4.2 billion and a 52-week range of $6.83 to $143.16. Surging AI-driven demand and easing export permit constraints have lifted revenue sharply and returned the company to profitability. The stock rallied about 10.6% on Wednesday to $64.38, carrying it back above its 200-day average, so the pre-market move reverses part of that gain. The technology sector was also weaker.

Earnings Due After the Close

Investors now look to third-quarter results after today's close, with consensus near $0.31 per share on revenue of about $66 million. Export permits for indium phosphide substrates and tensions between China and the United States are among the risks the company lists.

What Investors Will Weigh Next

The financing adds funding for capacity at a time of tight supply, but the redemption terms create a contingent obligation. The closing timeline, the results this evening and any update on export permits are the next items to follow.