Tower Semiconductor and Innolight advance high-performance near-package optics for AI infrastructure

Tower Semiconductor (TSEM) stock fell 18% in a week despite record Q3 revenue of $526M, up 33% YoY. The company guided for $600M in Q4 revenue, exceeding estimates. Lumentum (LITE) and Marvell (MRVL) also declined amid a semiconductor selloff and a $115B acquisition agreement. Analysts adjusted price targets post-earnings.

Tower Semiconductor (TSEM) reported Q3 2026 revenue of $526 million, facing competition in Silicon Photonics and Silicon Germanium. Gross margins are expected to decline to 55-58% due to depreciation. CEO Russell Ellwanger discussed expansion plans and capacity increases, aiming for a $2.85-$2.9 billion SiPho run rate by Q3 2027. The company's long-term model targets $3.6 billion in revenue and $1.2 billion in net profit, with execution risks and timing delays noted.

Semiconductor stocks fell sharply, with the PHLX Semiconductor Index (SOX) down 8.05%. Despite the decline, the index is up 33% year-to-date. AMD, Arm, onsemi, Seagate, and Tower Semiconductor reported strong earnings growth, driven by data center demand. AMD's revenue rose 45% YoY, while Arm's revenue increased 27% YoY. All five companies' shares were down as of 10:18 a.m. ET.

Tower Semiconductor (TSEM) fell 14% last week, largely due to a chip sector selloff triggered by Intel's (INTC) weak forecast. Despite this, Tower reported record Q3 revenue of $526M, up 33%, and issued Q4 guidance above estimates. The company aims for $1.1B annualized run rate in silicon photonics by Q4. Trading at 26x forward earnings, near its 5-year average, analysts see potential.

Stifel reduced its price target for Tower Semiconductor (TSEM) to $235 from $270, citing valuation concerns. The stock has fallen 17.85% in a week, trading at $161.08. Q3 2026 revenue was $526M, up 33% YoY, with strong gross margins and earnings. The company guided Q4 revenue to $600M, 3.5% above estimates, and expects silicon photonics revenue to exceed $1.1B. Analysts have mixed views on the stock's valuation.

Wedbush reduced its price target on Tower Semiconductor (TSEM) to $190 from $300, citing market headwinds, while maintaining a Neutral rating. The company reported strong Q3 results, beating earnings and revenue estimates, but shares fell 18% in a week, trading at $155.32. Wedbush remains cautious about the stock's future outlook.