(Bloomberg) — A clamor by investors for stocks that stand to benefit from the boom in artificial intelligence has propelled a little\u2011known French company to the top of Europe\u2019s 2026 equity rankings.<\/p>\n
Soitec SA, a semiconductor materials maker with a market capitalization of about \u20ac3.4 billion ($4 billion), is the top performer in a Bloomberg index of the region\u2019s large, mid and smallcap stocks with a gain of more than 300% this year. It\u2019s up 84% this month alone and analysts are raising price targets.<\/p>\n
After a two-year slump that erased 85% of its market value, Soitec\u2019s presence in the fast-growing field of photonics has prompted a rapid rebound. The technology, which accounts for only a small proportion of the company\u2019s sales, is increasingly being used in data centers to handle powerful workloads and stocks with exposure are in demand from the US to Asia.<\/p>\n
\u201cThere\u2019s a market frenzy about photonics in general, that\u2019s what the market wants, it\u2019s much broader than Soitec,\u201d said St\u00e9phane Houri, head of equity research at Oddo Bhf. \u201cWhile photonics only account for \u20ac100 million of sales, it\u2019s the visibility on the growth of demand for the technology which is driving the stock.\u201d<\/p>\n
Silicon photonics uses light to transmit data and has the potential to be faster and more power-efficient than older copper-based connections in data centers. Companies selling technology that can optimize data-center performance are seeing surging demand from large tech firms, which are spending massively to build out AI infrastructure.<\/p>\n
Soitec isn\u2019t the only beneficiary from investor demand for the technology. IQE Plc, a struggling UK semiconductor firm which had a market value of less than $70 million at start of the year, soared more than 10 times in just four months. Aixtron SE, whose tools are used in making the optical components, has seen its shares more than double in 2026.<\/p>\n
In the US, Lumentum Holdings Inc. and Coherent Corp. are among a group of optical stocks that have surged this year. Nvidia Corp., the leader in AI chips, is collaborating with others to develop silicon photonics and has signed multiyear deals with Lumentum and Coherent.<\/p>\n
Read: \u2018Market\u2019s Latest Shiny Objects\u2019: Optical Stocks Get AI Momentum<\/p>\n
Analysts, who for years had been cutting price targets for Soitec, are now warming to the stock. Oddo BHF raised its target to \u20ac85 from \u20ac50 this week, a price that was exceeded on Thursday. Several others, including Deutsche Bank AG, have also recently increased their objectives.<\/p>\n
Still, some are skeptical of Soitec\u2019s rally, reflecting uncertainty over whether photonics momentum can fully offset continued weakness in smartphones, which still account for more than half of the company\u2019s revenue.<\/p>\n
Citigroup Inc. reiterated a sell rating on April 10, projecting a 17% decline in smartphone unit volumes in fiscal 2027 and prolonged inventory digestion into 2028, even as it raised longer\u2011term earnings estimates and boosted its price target by almost 50% on stronger photonics demand.<\/p>\n
That mix of structural optimism and fundamental caution has turned Soitec into a market outlier \u2014 and a volatile one. The stock\u2019s 30\u2011day volatility of 112% is nearly five times the Stoxx 600\u2019s 20%, making it one of the most volatile stocks among European mid\u2011caps.<\/p>\n
Soitec\u2019s volatility was amplified by its high debt load, with debt occupying 28% of its enterprise value, according to data calculated by Bloomberg.<\/p>\n
Over the past two weeks, there were four trading days when the stock closed up more than 10%, underscoring how aggressively investors are positioning for an AI\u2011driven photonics cycle. And that strength showed little sign of abating on Friday, with the shares rising as much as 11% and hitting their highest level since September 2024.<\/p>\n
–With assistance from Michael Msika and Henry Ren.<\/p>\n
(Updates with more context in sixth, seventh and 12th paragraphs, and data throughout.)<\/p>\n