We came across a bullish thesis on Aehr Test Systems, Inc. (AEHR) on Ahead of the Curve’s Substack by Ashleigh Day. In this article, we will summarize the bulls’ thesis on AEHR. Aehr Test Systems, Inc. (AEHR)’s share was trading at $12.55 as of Nov 11th. AEHR’s trailing P/E was 12.80 according to Yahoo Finance.
A PXI hardware form factor lab with technicians installing and testing NI semiconductor test systems.
Aehr Test Systems (NASDAQ: AEHR) is a provider of semiconductor test and burn-in equipment, specializing in high-volume wafer-level burn-in solutions. Founded in 1977, AEHR gained significant traction with its Fox-XP product, introduced in 2014. The Fox-XP can test 18 wafers simultaneously with high power, catering to the increasing complexity of semiconductors, especially in AI applications. As the semiconductor industry has evolved, the need for robust testing solutions has grown, and AEHR’s equipment helps achieve higher yields by testing at the wafer level rather than after assembly. This demand has positioned AEHR well in the semiconductor market.
The company initially gained recognition in the Silicon Carbide (SiC) market, securing ON Semiconductor as a customer starting in 2021. This relationship led to a 20x increase in AEHR’s stock price, as ON placed regular large orders. However, a slowdown in electric vehicle (EV) sales and fab expansions caused a gap in orders, contributing to an 80% drop in AEHR’s stock from its highs. Despite this, AEHR remains poised for growth as it expands into various opportunities, including Gallium Nitride (GaN), power semiconductors, memory semiconductors, AI processors, and other emerging technologies. The company’s diversification strategy includes expanding its customer base across several industries, positioning it for long-term success.
Aehr’s SiC and GaN segments are particularly promising, as these materials are used in vehicle inverters, solar inverters, and charging infrastructure. Wafer capacity in this market is projected to grow substantially by 2030, and OEMs are increasingly focused on maintaining yields and reliability. AEHR’s ability to sell waferpaks, essential for each product iteration, gives it a strong position in this market. ON Semi’s expansion beyond Tesla to include the Volkswagen Group further strengthens AEHR’s prospects in the SiC and GaN sectors.
Additionally, AEHR is involved in testing for hard disk drives (HDDs), particularly Seagate’s HAMR drives, expected to ramp up production by mid-2025. This presents a near-term opportunity for AEHR as Seagate is likely to place substantial orders soon. The company is also making strides in the AI processor market, receiving commitments to benchmark its systems with major AI chip developers. AEHR’s acquisition of Incal, a test equipment manufacturer for packaged parts, strengthens its position in this growing sector.
In the memory semiconductor market, AEHR has been targeting high-volume fabs for years, and it is currently working with a flash memory company to benchmark its solution. The potential for large-scale orders in this space is significant, as memory fabs typically require dozens of testers for volume production.
The company is also seeing positive momentum in its SiC business, with follow-on orders expected from ON Semi due to new wins with Volkswagen. AEHR’s ability to tap into multiple high-growth markets—AI, memory, and SiC—presents substantial upside potential. With a solid cash position and a large backlog of opportunities, AEHR is positioned to generate hundreds of millions in annual revenue as its customers ramp up production. Should any of these opportunities accelerate, AEHR’s stock price could see substantial gains, particularly if its memory business takes off, potentially driving the stock to triple digits. The company’s current valuation offers an attractive entry point, with a clear path to significant upside.
Aehr Test Systems, Inc. (AEHR) is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 12 hedge fund portfolios held AEHR at the end of the second quarter which was 15 in the previous quarter. While we acknowledge the risk and potential of AEHR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AEHR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.