AXT Inc's stock surged 11.23% during intraday trading on Monday, as the company benefits from tightening supply conditions for indium phosphide substrates and secures a significant long-term contract.

Recent developments in China's export policies have intensified supply chain constraints for indium metal, a critical raw material for InP production. Chinese customs authorities have strengthened scrutiny of indium exports, requiring European buyers to disclose end-user information for the first time and extending approval times for North American buyers from same-day processing to several days. With China supplying nearly 70% of global indium and holding the entire global capacity for purifying 7N high-purity indium, these measures have created significant supply pressures. Export application rejection rates for U.S. and Japanese companies have reportedly exceeded 80%, contributing to a global InP capacity shortfall of over 70%.

As the leading U.S.-listed producer of InP substrates, AXT Inc stands to benefit from the resulting material scarcity premiums. Additionally, the company's subsidiary Beijing Tongmei recently secured a long-term supply agreement with Nanjing Casela Technologies worth approximately RMB 173 million for InP wafer substrates to be delivered in 2027, providing visibility into stable future revenue. The broader semiconductor equipment sector also showed strength during the session, providing additional support for the stock's upward movement.