Research Notes

All 8 names are different layers of the same AI infrastructure capital expenditure wave, specifically the optical interconnect supercycle. Three themes unified them: 1. AI OPTICAL INTERCONNECT SUPERCYCLE: Hyperscalers scaling GPU clusters to 100,000+ cards cannot use copper at 800G/1.6T speeds — they are mandating optical transceivers inside the data center. This is creating explosive demand across the entire optical supply chain simultaneously: InP substrate materials (AXTI), InP laser sources (SIVEF), transceiver manufacturers (AAOI), signal processing DSPs inside transceivers (MXL), and burn-in test for photonics chips (AEHR). 2. INDIUM PHOSPHIDE (InP) AS CRITICAL MATERIAL: InP is the irreplaceable substrate for high-speed optical devices. AXTI (+600% YTD) and SIVEF (+172% in a month) are the upstream InP supply chain. AXTI makes InP wafers, SIVEF makes InP laser arrays. Both hit record backlogs/partnerships driven by AI optical demand. 3. ADVANCED PACKAGING NEXT GENERATION: LPKFF (+300% YTD) is a German company with near-monopoly on LIDE glass substrate drilling — the technology that will replace organic substrates in chip packaging around 2027-2029. PENG (+80%) is an AI HPC integrator. SIMO (+189% YTD) pivoted from mobile storage controllers to enterprise AI SSD controllers. EARNINGS CATALYSTS (near-term triggers): - MXL: +85% single day April 24 — optical/AI revenue +136% YoY, raised guidance - SIMO: +massive April 29 — EPS $1.58 vs $1.30, enterprise AI boot drives +200% QoQ - AXTI: April 30 — InP backlog $100M+, margin expansion, Q2 guidance beat vs loss expected - AEHR: $41M record order April 16 from hyperscale AI customer for silicon photonics burn-in - AAOI: $324M+ backlog including $200M+ single 1.6T order from hyperscaler All are supply-chain reads on the same hyperscaler AI capex cycle.

InP (Indium Phosphide) is a compound semiconductor made from indium and phosphorus. Unlike silicon, InP has a direct bandgap, meaning it efficiently emits and modulates light at the wavelengths used in fiber optic communication (1310nm and 1550nm). This makes InP the irreplaceable material for: - High-speed optical transceivers (400G, 800G, 1.6T) - Coherent optical chips (used in long-haul and data center interconnects) - Silicon photonics laser sources (external light sources for on-chip photonics) - Co-packaged optics (CPO) laser arrays WHY SUDDENLY CRITICAL FOR AI: As GPU clusters scale to 100,000+ cards, copper interconnects hit a power and bandwidth wall. Every AI server must connect via optical transceivers. A single hyperscaler AI cluster needs hundreds of thousands of transceivers. Each transceiver needs InP lasers. Demand has exploded faster than InP wafer capacity can scale. KEY COMPANIES: - AXTI (AXT Inc): One of the only large-scale InP wafer manufacturers globally. Beijing Tongmei subsidiary. Backlog >$100M, raising $632M to expand capacity. - SIVEF (Sivers Semiconductors): Swedish company making InP laser arrays for CPO and silicon photonics. Partnership with O-Net/Enablence for CPO external light sources. - Compound semiconductor foundries: IQE (UK), WIN Semiconductors (Taiwan) also relevant. GEOPOLITICAL NOTE: Indium is partially sourced from China (byproduct of zinc smelting). InP wafer manufacturing is concentrated in a few companies globally. Supply tightness + AI demand surge = major pricing power for AXTI and similar.

AEHR Test Systems makes burn-in and reliability test equipment — specifically the FOX-XP platform, which runs chips at elevated temperature and voltage stress for hours/days before deployment to catch early-life failures (infant mortality). This is standard practice for high-reliability applications. WHY AI OPTICAL MAKES AEHR CRITICAL: 1. Silicon photonics chips (the optical engines inside CPO and advanced transceivers) are compound semiconductor devices. Unlike standard CMOS, they cannot be fixed in the field. A failed optical chip in a hyperscaler AI cluster causes rack downtime. 2. Hyperscalers require 100% burn-in testing of every silicon photonics chip before deployment — non-negotiable for uptime SLAs. 3. As 800G/1.6T transceiver volumes explode (AAOI targeting 500K units/month by end-2026), every unit needs AEHR-style burn-in testing. 4. AEHR also recently won custom AI ASIC burn-in orders — hyperscalers are now burn-in testing their custom AI chips (TPUs, Trainium, etc.) at wafer level. 2026 CATALYSTS: - New silicon photonics customer win (March 31): +23% single day - $41M record order from hyperscale AI customer (April 16): largest in company history - H2 FY2026 bookings >$92M; backlog $50.9M record - Returning to profitability in Q4 ANALOGY: AEHR is to silicon photonics what KLA is to advanced logic — the unavoidable quality control step at scale.

LPKF is a German precision laser equipment company (founded 1976, Frankfurt: LPK, OTC: LPKFF). Their relevant technology for 2026 is LIDE — Laser-Induced Deep Etching. WHAT LIDE DOES: Uses ultrafast lasers to modify glass, then wet etching to create extremely precise micro-holes (vias) in glass sheets. This is the critical enabling step for glass core substrates — the next-generation semiconductor packaging platform that Intel, TSMC, Samsung Electro-Mechanics, and others are developing as a replacement for organic (resin) substrates. WHY GLASS SUBSTRATES MATTER FOR AI CHIPS: - Organic substrates (FR4/ABF) have thermal expansion mismatch with silicon — limits how many chiplets can be tiled - Glass has near-zero thermal expansion mismatch — allows much larger, more complex packages - Glass enables finer pitch interconnects — more signals per mm² - Critical for AI accelerator packaging where GPU die + HBM + optical engines must all be co-packaged - Intel calls it "Glass Core Technology"; TSMC is developing glass-based CoWoS variants LPKF MOAT: They and one smaller German competitor are the only companies in the world with a proven, production-ready LIDE process. When glass substrate volume production ramps (~2027-2029), LPKF becomes a near-monopoly capital equipment supplier. WHY THE STOCK RALLIED 300%: Entirely forward-looking. The AI infrastructure capex narrative pulled the timeline forward in investors minds. LPKF is pre-revenue on glass substrates — current revenue is €105-120M guidance from legacy PCB laser tools. The glass substrate story is a 2027-2029 revenue event being priced in now. CONNECTION: Glass substrates are the next generation of what TSMC CoWoS does today. Both enable chiplet + HBM co-packaging. Glass enables the transition beyond current CoWoS limits.