AXT, Inc. has now delivered its Q2 result — and the market's reaction has been brutal, with the stock falling another 10.7% on July 28 to close at $42.76, extending the week's loss to 24% and the month's to 39%.
The earnings reaction crystallised what the short book had been pricing for weeks. Bears built their position aggressively through mid-July, reaching a peak of 11.75 million shares — 25.2% of the free float — on July 17. That sprint phase has since eased. Short interest has now pulled back to 10.25 million shares, or 22.9% of float, down 7% on the week and 1.7% on the day. The direction of travel has shifted from accumulation to reduction. Yet at nearly 23% of float, this remains one of the heavier short positions in the small-cap semiconductor space, and the 30-day build of 45% underscores that the structural thesis — China revenue concentration, export-licence dependency, competition from larger players — has not been abandoned. It has, in part, been validated.
The borrow market offers no drama to counter that read. Availability has actually loosened further, now at 473%, up 14% on the week and well above the 52-week minimum of 204%. For every share currently borrowed, roughly four and a half sit unused in the lending pool. Cost to borrow is negligible at 0.47%. Short sellers are trimming voluntarily — not being squeezed. Options positioning reinforces the calmer tone in the lending market. The put/call ratio has dropped to 0.53, nearly one standard deviation below its 20-day average of 0.65. That is a notable shift from late June, when the PCR was running above 1.0 and protective demand was heavy. Call-side interest has risen relative to puts even as the stock has fallen — a divergence worth tracking.
The Street is recalibrating, but slowly. B. Riley's Dave Kang — the only analyst action in the past 14 days — cut his price target from $73 to $52 on July 28 while keeping a Neutral rating. That move is consistent with analysts acknowledging a changed reality without abandoning the stock entirely. Wedbush, the more constructive voice, raised its Outperform target to $93 back in May after the Q1 beat; that target has not been publicly revised post-Q2, leaving the consensus mean at $91.25. The gap between that figure and the current $42.76 print is stark — roughly 113% implied upside — but reflects targets set before the full magnitude of the post-peak collapse became clear. The bull case centres on AXT's dominant position in indium phosphide substrates for AI data-centre optical interconnects and the Tongmei capital raise; the bear case points directly to China revenue risk and what export-licence friction could mean for that growth path. EPS momentum factor scores remain strong — the 90-day revision rank is at the 100th percentile — but the EPS surprise rank sits at just 28, suggesting forward estimates were cut hard post-print. The PE multiple has compressed sharply, down nearly 60 points over the past 30 days to 74.6x, while EV/EBITDA has shed 11 points to 54.8x. Valuation is contracting, but not yet cheap on conventional multiples for a company whose near-term earnings path is uncertain.
The institutional and insider picture is worth noting as context. Directors sold more than $20 million of stock in June at prices between $87 and $115. The Founder and CEO Morris Young alone sold 123,601 shares on June 2 at $113.33, netting roughly $14 million. Every one of those sales now looks prescient — none of those prices has been revisited since. BlackRock added materially in the period ending June 30, picking up 3.5 million shares, and Jane Street also built a position. Neither of those moves is post-peak information; they reflect accumulation into the run-up rather than conviction at current levels.
Peers followed AXTI lower on the week, but none matched the scale of the move. GFS fell 17.5%, SMTC dropped 19.3%, and TSEM lost 19.1% — broad sector pain, but AXTI's 24% weekly decline still exceeded the cohort. The next question for the stock is whether the Q2 print itself contained enough detail on Tongmei's licensing progress and InP substrate demand to give bulls a credible re-entry thesis, or whether the result confirmed the concerns that drove the short book's 45% monthly build.
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