Indium phosphide wafer prices have surged 250% to $5,000 following China's export restrictions, with further increases expected. Supply constraints are driving revenue growth for substrate makers like AXT, LandMark Optoelectronics, and VPEC, while buyers secure long-term contracts to secure capacity for data center applications.
Outlier Capital argues that hyperscaler laser bottlenecks cannot be resolved by increased capex alone, as InP crystal growth and qualification processes have inherent physics and lead times that money cannot compress. Major suppliers like Lite, Coherent, Applied Optoelectronics, and Sive face manufacturing constraints extending into 2027-2028, meaning the market's capex-driven thesis remains intact.