Coherent Samples 300mm SiC Substrates for AI Infrastructure, Adding Optionality Beyond InP Optics

What happened

Coherent announced it has begun customer sampling of 300mm high thermal conductivity silicon carbide (SiC) substrates to leading AI semiconductor partners, signaling an expansion into power device materials for AI power delivery. This move complements its core strength in indium phosphide (InP) optical components, which currently drive datacenter revenue growth and margin expansion. The master report highlights Coherent's InP manufacturing advantage, with Q3 FY26 datacenter revenue up 41% Y/Y and non-GAAP gross margin at 39.6%, but notes the stock trades at 145x earnings with no margin of safety. The SiC sampling is early stage and does not yet contribute to revenue, but it could diversify Coherent's exposure to the AI infrastructure buildout beyond optical interconnect. However, given the company's stretched valuation and cash conversion concerns, this news is incremental rather than transformative.

Implication

Investors should see this as an optionality play rather than a near-term catalyst. While SiC substrates could open a new high-growth market in AI power delivery, qualification cycles are long and revenue contributions are likely years away. Coherent's core thesis on InP and AI optics remains intact, but the stock's valuation already prices in significant execution success. Any execution slip in datacenter revenue or margin would outweigh this emerging opportunity. Therefore, maintain a cautious stance until evidence of revenue from SiC appears or core fundamentals improve.

Thesis delta

The introduction of 300mm SiC substrates adds a new potential growth vector in AI power electronics, but it does not change the core thesis around InP and optical networking. The master report's WAIT rating and margin-of-safety concerns remain unchanged, as this is an early sampling announcement with no immediate financial impact.