The analyst is adding heavily to their long position in IQE on dips, expecting the stock to more than double by end of 2026 due to strong photonics demand, supply chain tailwinds, and IQE's unique foundry position.
IQE benefits from upstream supply chain tailwinds via AXTI's substrate capacity ramp, downstream demand sold out through 2028 from customers like LITE, and its irreplaceable foundry status with proprietary IP and global compliance. The analyst forecasts IQE's market cap to exceed £1.1B by end 2026 driven by photonics tailwinds and strong execution.
“ $IQE dropped 20%. Shall I sell?! ” No. I added heavily to my position on last week's dip. Summary on why I'm adding to my $IQE position on any dip: 1. Upstream supply chain tailwinds: $IQE's photonics & GaAs segments rely on $AXTI's substrates. $AXTI guided “sequential revenue growth in Q1 2026, driven by growth in InP for the AI infrastructure build-out.” With InP backlog >$60M and plans to 2x capacity in 2026. Since InP substrates are crucial for 1.6T transceivers and CPO: $AXTI's capacity ramp directly removes any chokepoint for $IQE's photonics epi output. And still, $IQE has internal substrate manufacturing capabilities in UK/USA - which produces GaAs, InP, and GaN. 2. Downstream demand sold out: $LITE are $IQE's flagship customer (multi yr VCSEL/EML epi partner): - $LITE has its hyperscaler order book sold out through 2028. - $LITE CEO said “we’re falling further and further behind the demand” - With agreements locking multi yr visibility straight into $IQE's photonics segment. - $NVDA $2B+ investments in $LITE & $COHR signal hyperscalers are locking in capacity yrs ahead, with epi being a huge bottleneck. $LITE's VCSEL & EML epiwafers are exactly what $IQE grows on InP/GaAs. So, locked-in multi-yr volume + sold out book = multi-yr revenue for $IQE's photonics segment. Then you also have $QRVO + $SWKS as $IQE customers for GaAs/GaN epi. It’s less obvious, but $AVGO also source GaAs/GaN epiwafers from $IQE too for its RF business - even while maintaining captive InP epi capabilities for its photonics products. 3. $IQE are an irreplaceable foundry: - patents on epi wafer growth processes (GaAs, InP, GaN) - 35+ years of proprietary tuning for yield/defect control - $IQE Serves everyone ($LITE, $COHR, $AVGO, etc.) without competing downstream - Chinese players face Western export/qualification walls 4. $IQE is different to competitors (and superior): - Substrate specialists (e.g. $AXTI): Sell raw wafers and lack $IQE's IP. - Vertical integrators ( $COHR, $WOLF, Sumitomo): Do some in-house epi but still outsource for flexibility. $IQE is purely neutral foundry - broader access, no channel conflict. - Asian players (e.g. IntelliEPI): Cost-competitive in GaAs but lack Western defence quals + geopolitical risk. $IQE wins on yield, reliability, and secure supply. $IQE's differentiation is pure-play scale + IP + global compliance = “safe” supplier for customers ----- MC forecast: I personally forecast $IQE to >2x until end of 2026 to ~£1.1B MC. Driven by photonics tailwinds materialising + strong execution - $LITE's 2028 sell-out + $AXTI's capacity doubling signal sustained (and accelerating) epi demand. Then any sale of their Taiwan ops would carry a further premium on top (Board are already encouraging bids). Imo, the 20%+ drop last week was just noise r.e. Iran, and nothing to do with fundamentals.
| Horizon | Raw move | vs SPY |
|---|---|---|
| 1 day | +0.0% | +0.0% |
| 1 week | +51.1% | +50.7% |
| 1 month | +89.0% | +84.1% |
| 3 months | -31.7% | -35.1% |
| 6 months | — | — |