This week, Aehr Test Systems encountered a setback.
Aehr Test Systems (AEHR) saw a significant drop in share price by 25.7% within a week, following its second-quarter 2025 earnings report. Investors were left less than impressed with the company's revenue outlook and management's comments on future growth prospects.
Navigating the EV Market Challenges
As a key player in silicon carbide wafer level and test burn-in systems for chip manufacturers, Aehr has been heavily dependent on the electric vehicle (EV) market. With production plans for EVs taking a hit due to subpar sales, Aehr finds itself facing a tough year ahead. CEO Gayn Erickson echoed this sentiment, stating that growth in silicon carbide sales, excluding China, may remain challenging until 2026.
The Silver Lining
Despite these challenges, a glimmer of hope lies in Aehr's recent expansion into the artificial intelligence (AI) market. The company secured an initial $10 million order for test and burn-in equipment from a large-scale data center hyperscaler. Furthermore, Aehr is looking to establish a presence in the gallium nitride semiconductor market, which offers broad industry exposure. Diversifying its revenue streams in this manner would help cushion the impact of the current market uncertainties.
AI and GaN: Opportunities Ahead
The AI chip market is projected to see double-digit annual growth, driven by substantial investments in data centers and the expanding AI ecosystem. Aehr's recent acquisition of Incal Technology positions the company well to capitalize on this growth. Additionally, the gallium nitride chip market offers wide-ranging industry exposure, making it an attractive investment option as it caters to the demand for rapid charging and USB power delivery.
Silicon Photonics and Wafer-Level Solutions
Aehr's focus on silicon photonics devices, used in data centers and 5G infrastructure, is a significant growth driver. By leveraging its expertise in wafer-level testing and burn-in solutions, the company is well-positioned to meet the increasing demand for these devices. Moreover, Aehr's commitment to innovation through higher levels of parallel testing, real-time analytics, and advanced semiconductor manufacturing process integration ensures it stays ahead in various semiconductor markets.
Aehr's Perspective on China
In the face of market challenges, Aehr remains cautiously optimistic about its opportunities in China. Despite trade and intellectual property risks, the company is actively engaged with potential new silicon carbide customers and is involved in a lawsuit against a local supplier for intellectual property infringement, which could potentially secure its position in the Chinese market.
With this diversified strategy in place, Aehr Test Systems is poised to navigate the current challenges in the silicon carbide chip market and capitalize on the expanding demand in various high-growth semiconductor markets.
In light of the financial challenges faced by Aehr due to the EV market struggles, investors might consider diversifying their portfolios by investing in companies with strong potential in the AI and gallium nitride semiconductor markets, where Aehr has shown progress. To maximize returns, they should closely monitor Aehr's performance in these sectors, as well as its progress in the silicon photonics and wafer-level solutions markets.
Given Aehr's promising growth opportunities in AI and gallium nitride semiconductors, and the potential for success in China despite market uncertainties, savvy investors might consider reallocating some of their funds towards these high-growth sectors, diversifying their risk and optimizing their returns.
