IQE, the Welsh supplier of semiconductor wafers, has swung to a £6 million core profit in the first half of the year, driven by surging demand from artificial intelligence data centers. The company, which is listed on London's AIM market, said its results beat its own expectations and that momentum has continued into the second half.
IQE sits near the very start of the AI supply chain. It grows ultra-thin layers of semiconductor material on wafers, which customers later turn into photonics components—such as lasers and optical switches—that move data around inside and between data centers. As AI workloads explode, these data centers need ever-faster ways to shuttle information, and that is translating into orders for IQE's products.
Indium phosphide: a key material for AI
The company said it is adding capacity for indium phosphide, a compound semiconductor that is particularly well-suited for high-speed optical communications. Unlike traditional silicon, indium phosphide can emit and detect light, making it essential for the lasers and photodetectors used in fiber-optic networks that link data centers.
This expansion is a bet that the AI boom will keep driving demand for high-performance networking components. IQE's customers include major chipmakers and photonics firms, and the company's wafers are a critical input for their products.
The company also reaffirmed its full-year outlook after raising its revenue guidance earlier. That suggests management is confident the strong demand will persist, even as some parts of the broader semiconductor industry show signs of cooling.
Move to London's main market
IQE also announced it is targeting a move from AIM to London's main market in the first half of 2027. AIM is the London Stock Exchange's junior market, designed for smaller, growing companies. A move to the main market typically signals a company's maturation and can attract a wider pool of institutional investors, as many funds are restricted from holding AIM-listed stocks.
The planned upgrade comes as IQE looks to solidify its position in the AI supply chain. A main-market listing could improve liquidity and visibility, making it easier for the company to raise capital for future expansion.
What it means for investors
For everyday investors, IQE's turnaround is a reminder that the AI boom isn't just about the big names like Nvidia. The entire supply chain—from materials suppliers to equipment makers—is benefiting. Nvidia's massive equity portfolio is a sign of how deeply AI demand is reshaping the tech landscape.
However, investing in a company like IQE carries risks. The semiconductor industry is cyclical, and demand can swing sharply. IQE has posted losses in recent years, and its return to profit is encouraging but not a guarantee of sustained success. The company's reliance on a handful of large customers also adds concentration risk.
Investors should also note that IQE's stock is listed on AIM, which can be more volatile and less liquid than the main market. The planned move to the main market could help, but it's still a year and a half away.
For those looking to understand the broader AI trade, IQE's results are a useful data point. AI-driven growth is showing up in earnings across the tech sector, from software to semiconductors. And as US services demand stays hot, the economic backdrop remains supportive for tech spending.
Ultimately, IQE's story is about positioning in a fast-growing niche. The company's ability to execute on its capacity expansion and its planned listing will be key to whether it can turn this momentum into lasting profitability.
