For most investors, the AI infrastructure trade begins and ends with GPUs. NVIDIA $NVDA ( ▲ 3.67% ) dominates the headlines, hyperscalers dominate capital spending, and networking companies receive most of the attention whenever another trillion dollars is committed to AI infrastructure. Yet every AI cluster depends on something far less glamorous.

As AI models become larger and data centers continue scaling, moving enormous amounts of data between thousands of GPUs has quietly become one of the industry’s biggest bottlenecks. Faster processors are only useful if information can travel between them just as quickly. That is creating an unprecedented wave of investment in optical networking—a critical layer of AI infrastructure that receives only a fraction of the attention. One of the biggest beneficiaries of this trend is AXT $AXTI ( ▲ 12.27% ).

Following another record quarter, management reiterated that demand continues to exceed production capacity, signed additional long-term supply agreements with major customers and expects revenue to continue increasing throughout the remainder of 2026 and into 2027.

Despite rallying 3,000% over the past year, the market is still underestimating how strategically important AXT’s products are becoming as AI infrastructure spending accelerates worldwide. Let’s dive in.