Serenity: Projects that prices of upstream materials for AI optical interconnects will continue to rise.

Serenity issued a statement noting that a new research report from Nomura Securities points out that as AI infrastructure construction continues to heat up, the upstream photon materials supply chain is facing dual pressures of surging demand and tightening supply. AXTI and IQE are among the main beneficiaries of the indium phosphide (InP) industrial chain. In terms of pricing, the price of 2-inch InP substrates is expected to rise by 42% to 76%, while 3-inch InP substrates will increase by approximately 78%; the price of 2-inch EML epitaxial wafers is projected to rise by 50% to 75%, and the price of 3-inch CW epitaxial wafers will also jump by more than 40%. The report argues that the ongoing expansion of AI data centers by hyperscale cloud service providers is pushing the entire optical communication industry chain into a stage of tight supply and demand, with bottleneck signs emerging across all links from material prices and end-market demand to supply capacity. Serenity stated that as AI optical interconnect demand continues to release over the next few years, upstream photon material prices will keep rising, similar to the price hike cycle SanDisk experienced before. Whether this judgment will hold true as AI demand curves climb further in the next two years remains to be verified by the market.