Woofun AI data shows that Nomura Securities projects significant price increases for upstream photonics materials, driven by surging AI infrastructure demand and tightening supply. Indium Phosphide (InP) substrates are expected to rise by 42% to 76% for 2-inch wafers and approximately 78% for 3-inch variants.

Additionally, 2-inch EML epitaxial wafers may see increases of 50% to 75%, while 3-inch CW epitaxial wafers are projected to climb over 40%. AXTI and IQE are identified as primary beneficiaries within the InP industry chain.

The report attributes these shifts to hyperscale cloud providers expanding AI data centers, creating a supply-demand imbalance across the optical communication sector. Bottlenecks are evident in material costs, end-user demand, and production capacity. Serenity notes that upstream photonics material prices will likely continue rising over the next few years, mirroring historical pricing cycles seen with Sandisk, though market validation of this trajectory remains pending.