IQE plc and Tower Semiconductor announced a multi-year supply agreement for Indium Phosphide (InP) epiwafers used in optical connectivity for AI-driven data centers, aimed at enhancing Tower’s silicon photonics platforms.

The collaboration targets high-speed data transmission, aiming for 200 Gb/s per lane for pluggable transceivers and prototypes for future 400 Gb/lane modulators, with potential applications in optical circuit switches for data centers.

IQE’s CEO highlighted the company’s position in Tier 1 hyperscale cloud and AI infrastructure markets and its readiness to scale InP epitaxy for commercial deployment.

The high price-to-earnings ratio signals strong growth expectations but raises questions about valuation sustainability; there is no insider trading activity reported in the last year.

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IQE faces ongoing financial headwinds, including losses and negative gross profit in 2025, with rising debt and lower shareholder equity, though some technical indicators show positive market momentum.

The press release includes forward-looking statements and notes risks and uncertainties; Tower provides a worldwide royalty-free license and sets minimum volume commitments for future growth.

IQE’s shares rose about 17% in London to 53.90 pence, valuing the company at roughly GBP 720.6 million.

Media and investor contact information for IQE, Peel Hunt, Deutsche Numis, and Headland Consultancy is provided.

The bullish case rests on IQE achieving operating leverage from AI, photonics, aerospace and defence markets, while risks include execution, AIM stock volatility, and whether AI optimism translates into profitable volume.

Investors responded positively as the deal provides revenue visibility and IP risk reduction; IQE shares jumped about 18% in early trading amid AI data-centre demand as a key driver.

Near-term catalysts include the June 30 AGM and the September half-year update, with signals from Tower and MACOM-linked supply agreements potentially translating into order book visibility and 2026 revenue growth targets.