Coherent (NASDAQ: COHR) Wins Up To $50M in CHIPS Act Funding for Texas Indium Phosphide Expansion

Coherent Corp. (NASDAQ: COHR) has signed a letter of intent to receive up to $50 million under the CHIPS and Science Act to expand its indium phosphide semiconductor facility in Sherman, Texas, according to the company's announcement. The project is expected to double the facility's production space, quadruple wafer capacity, and create more than 1,000 jobs, with the expansion focused on supporting AI datacenter optical networking applications. Shares of Coherent fell 7.50% on Tuesday, June 16, 2026, closing at $382.81.

Expansion Terms and Scope

• Up to $50 million in CHIPS and Science Act funding secured via a signed letter of intent, providing federal backing for the Sherman, Texas project.
• Production space doubles at the existing 6-inch indium phosphide semiconductor facility, increasing manufacturing footprint without requiring a greenfield build.
• Wafer capacity increases fourfold, a step-change in output that the company says targets AI datacenter optical networking demand.
• More than 1,000 jobs are expected to be created as part of the expansion, according to Coherent's announcement.
• The announcement also highlighted a deeper partnership with NVIDIA, according to reporting from Yahoo Finance, focused on photonics for AI infrastructure.

Why It Matters

Indium phosphide is a compound semiconductor critical for high-speed optical transceivers used in datacenter interconnects, and Coherent's Sherman facility is one of relatively few domestic sources of 6-inch indium phosphide wafers. The CHIPS Act funding structure reduces the capital burden of the expansion on Coherent's own balance sheet, with the federal letter of intent providing a defined funding ceiling of $50 million against what would otherwise be a fully company-funded capacity investment.

The deepened NVIDIA partnership cited in the announcement signals that the expanded capacity has an identified end-market pull, rather than representing speculative supply-side investment. Quadrupling wafer output at an existing facility, rather than constructing a new one, also limits execution risk associated with site qualification and process ramp timelines, though the company has not disclosed a specific completion date for the project.

Wall Street View

Analyst sentiment on Coherent remains tilted decisively positive heading into this announcement. As of June 1, 2026, the consensus stood at 7 Strong Buy, 15 Buy, and 7 Hold ratings, with zero Sell or Strong Sell recommendations across 29 analysts tracked. The prior month's consensus of 8 Strong Buy and 14 Buy reflects a modest shift in conviction distribution but no deterioration in the overall bullish skew.

Investor Takeaway

The letter of intent for up to $50 million in CHIPS Act funding is a concrete federal commitment to Coherent's domestic manufacturing strategy, with the fourfold wafer capacity expansion positioned directly at the AI optical networking market. The NVIDIA partnership reference adds demand-side credibility to the supply expansion. With 22 of 29 analysts rating the stock Buy or Strong Buy, Wall Street's view on the company's photonics positioning remains constructive heading into the buildout.