This Obscure AI Stock Is Up by Almost 6,000% Over the Past Year. Can It Go Higher?

While artificial intelligence (AI) stocks have delivered explosive returns in recent years, none have kept pace with AXT (NASDAQ: AXTI) over the past year. The materials science company's stock is up roughly 6,000% over the past year. This is largely because the wafer substrates it produces are vital for the AI boom.

Naturally, some investors feel like they missed out on the opportunity here, but the stock is still worth keeping an eye on. Here's what investors should know about this highly volatile growth stock that has outpaced all of the others over the past year.

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AXT's indium phosphide wafer substrates are next-gen technology for the AI boom

AXT makes semiconductor wafer substrates that include indium phosphide, gallium arsenide, and germanium, with the first material being the most important. Those semiconductor wafer substrates are the foundation for AI chips.

It's not the only company that makes wafers, and Nvidia currently prioritizes the silicon wafers that Taiwan Semiconductor Manufacturing produces. However, those silicon wafers have limits that indium phosphide can exceed. The types of wafers AXT produces can handle more intense AI workloads than the silicon wafers currently found in most AI chips.

AXT and two other companies control approximately 80% to 90% of the indium phosphide wafer market. Indium phosphide wafers are more expensive than silicon wafers, which means a complete replacement is out of the question. However, these same wafers can move data faster while consuming less electricity, thereby reducing data center operational costs.

The risks are enormous

AXT's substantial stock gains do not coincide with fundamental growth. Revenue decreased from $99.4 million in fiscal 2024 to $88.3 million in fiscal 2025. The company reported preliminary first-quarter 2026 revenue, saying it would come in between $26 million and $28 million. Annualized, that would definitely exceed the 2024 number.

That's not a substantial leap, but AXT told investors in Q4 that its customer base has broadened to Tier-1 companies, which it had limited exposure to earlier in the year. Tier-1 companies refer to large global customers, but guessing which of those AXT has among its customers at this point would be speculation.

Furthermore, the company is still burning through cash as it expands. It reported $23.2 million in net losses last year and recently raised $550 million by diluting shareholders. The preliminary Q1 2026 results suggest that more net losses are on the way.

To the company's credit, net losses have narrowed year over year, and the company is sitting on innovative technology. If a few Tier-1 companies become customers, AXT's narrative changes. Most investors seem eager to get on board rather than wait for concrete fundamental shifts to emerge.

Investing in AXT is currently more about riding the indium phosphide wafer opportunity than AXT itself. The price-to-sales ratio is very high at 38x, while the forward P/S is 8x. It has a compelling long-term opportunity, but the valuation looks stretched at current levels. Be sure to take a closer look at the metrics before making any long-term investment decision on this stock, and expect volatility along the way.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.