Investors are flocking to stocks expected to benefit from the artificial intelligence boom, a trend that has propelled a little-known French company to the top of Europe's equity gainers list for 2026. French semiconductor materials maker Soitec SA, with a market value of approximately €3.1 billion ($3.7 billion), has seen its share price surge nearly 270% this year, making it the best-performing stock in Bloomberg's Europe large-, mid- and small-cap indexes. The stock has climbed 66% this month alone, prompting multiple analysts to raise their price targets.

Following a two-year slump that wiped 85% off its market value, Soitec has staged a rapid rebound driven by its positioning in the high-growth field of photonics. Although this technology currently contributes a small portion to the company's revenue, it is increasingly being adopted by data centers to handle high-computational workloads. Consequently, related stocks in this sector, from the United States to Asia, have garnered significant market enthusiasm.

"The entire market is captivated by the photonics theme; it's where capital is flowing, and the excitement isn't limited to Soitec alone," said Stéphane Houri, Head of Equity Research at Oddo Bhf. "While the photonics business currently generates only €100 million in revenue, what is truly driving the share price higher is the market's clear anticipation of growing demand for this technology."

Silicon photonics technology uses light to transmit data, promising faster speeds and greater energy efficiency compared to traditional copper wire connections in data centers. Technology suppliers that can optimize data center performance are experiencing a surge in demand from major tech companies investing heavily in AI infrastructure.

Analysts, who had been consistently lowering their price targets for Soitec in recent years, are now gradually shifting their stance. Oddo BHF raised its target price for the stock from €50 to €85 this week, a level the shares surpassed on Thursday. Several other firms, including Deutsche Bank, have also recently increased their targets for Soitec.

Despite this optimism, some remain skeptical about Soitec's sharp rally. The core uncertainty lies in whether growth in the photonics business can fully offset persistent weakness in the smartphone segment, which still accounts for over half of the company's revenue. On April 10, Citigroup reiterated its "sell" rating on Soitec, forecasting a 17% decline in smartphone segment sales for fiscal 2027 and expecting the inventory digestion cycle to extend into 2028. However, citing stronger photonics demand, the bank also raised its long-term profit outlook and increased its price target by nearly 50%.

This mix of long-term optimism and near-term caution makes Soitec an outlier in the European market, as well as highly volatile. The stock's 30-day volatility stands at 110%, nearly five times the 21% volatility of the Europe Stoxx 600 Index, ranking it among the most volatile mid-cap stocks in Europe. On April 10, the stock surged 19% in a single day, underscoring heavy investor betting on the AI-driven photonics cycle.