Aehr Test Systems

The Verdict

We rate Aehr Test Systems Unattractive. The business is mixed: it is the one company shown screening AI chips while still on the wafer, but its sales fell two years in a row and rest on a few unnamed buyers. The price is full: at about 12 times next year's forecast sales, it still counts on years of growth after that which nobody has ordered, so a miss would hurt. As a bet it is Fragile: even if a second AI chip maker signs up, the company would be worth only a little more than it costs today, and if the AI orders stop, shareholders keep little beyond the cash.

The long caseIf AI chips keep packing more dies and memory into one package, screening each die before packaging pays, and Aehr is the one shown doing it.

The company

Some chips are weak from birth and fail in their first weeks of use. Burn-in finds them by running chips hot and under power for hours in the factory.

Aehr's main machine does this to whole wafers, the discs chips are cut from, nine at once, through a contact plate built for each chip design. A second line, bought in 2024, handles finished chips.

Its biggest AI customer used to test chips after packaging and now does all its burn-in on the wafer instead.

How it makes money

Aehr earns most of its money selling the machines: $28.7M of last year's $50.0M. The contact plates made for each chip design brought in $14.9M, and are bought again whenever a customer changes its chip, so management treats them as repeat business. Service brought the rest.

The money comes from very few hands: five customers paid 70% of last year's sales, and none is named.

Who runs it

Gayn Erickson has run Aehr since 2012, through the car-chip boom and the turn to AI. The founder, Rhea Posedel, is still chairman.

Insiders own about 4.6%. Bonuses paid nothing last year, and long-term share awards pay on reaching a sales target by June 2027. Insiders sold 743,893 shares in the past year, none under a pre-set selling plan, and bought none.

Why it wins, and who could beat it

Why customers come back

An AI chip is now packaged with several other chips and stacks of memory, so one weak chip can spoil an expensive package. Intel has said many defects still get past the wafer stage. Aehr says catching them earlier pays many times over, though that figure is its own.

Its edge is know-how in powering a whole wafer at once, kept mostly secret. Nobody else is shown doing it for AI chips; for car chips, a Chinese rival sells a similar machine and won the first patent ruling.

The threat

The main alternative is to test after packaging, as Teradyne's and Advantest's machines do; Aehr's lead AI customer stopped doing that. For finished AI chips, rivals such as AEM in Singapore already sell burn-in machines, and AEM says a large AI chip designer chose it. For car chips, three Asian makers sell wafer machines like Aehr's.

The rivals: TER, TRT, and 3 more that are private, in-house or listed abroad.

How big it could get

How big this could get

Chip-testing machines of all kinds sell for about $15.3B a year, on the industry group SEMI's forecast for 2026, rising to $20.8B by 2028. Aehr sold $50.0M last year.

Nobody outside the company measures how much of that is burn-in, so the true size of Aehr's market is unknown. What is measured is the driver: TSMC, which makes most AI chips, expects its AI chip sales to grow by well over half a year until 2029.

Who has signed

Since May the lead AI customer ordered $22M of wafer machines, a large internet company $41M of the finished-chip machines, and a light-chip customer two more systems. Car-chip customers added more than $8M.

None of these buyers is named, and the company says most orders can be cancelled with small penalties.

The results

The numbers

The last report (14 Jul)

Quarter ended May 2026, filed figures.

In the quarter to May 2026, Aehr's sales rose 34% to $18.8M and it made $1.4M, its only profitable quarter of a year that lost $7.1M.

The bigger news was orders: a record $60.7M in the quarter, bringing orders waiting to ship to $100.6M. On that, Aehr forecast sales of $130M to $150M for the year to June 2027, up 160% to 200%, with a profit before tax of about a fifth of sales.

What it did to the thesisIt turned the AI story from promises into orders, enough to cover most of the coming year. It left open the question the price turns on: whether new AI customers follow after this year, and whether the profit margin returns.

The price, and where we disagree

In short. Full. It pays for this year's forecast and still for years of fast growth after it, from customers who have not yet ordered.

The shares rose sharply over the past year, all of it from investors paying more for each dollar of sales. They hit $145.61 in August, fell almost by half in two weeks with no news, as insiders had just sold, and fell by almost half again between 5 and 22 October, to $55.65, with no company news.

The next test comes soon: the first quarter of the new year ended in late September, and its results are due in early November.

Where we disagree with the market

In 2023 Aehr forecast at least $100M of sales on one car-chip customer, cut that twice and delivered $66.2M; the shares fell from $54.10 to $9.83. Today's orders are cancellable, the buyers unnamed, and insiders sold into both rallies.

Against us: the orders are real, and a second large AI chip maker is testing Aehr's machine on its production line. If it orders, much of our view falls away.

What could go wrong, and how we would know

The risks

• A few buyers Three customers were half of last year's sales and the forecast rests on two unnamed buyers whose orders can be cancelled.
• Rivals for finished chips AEM and others already sell burn-in for finished AI chips, and one large designer chose AEM.
• Margins under pressure Gross margin fell to 35.3% last year, and suppliers of power parts raised prices 40%, management says.
• Chinese copies A Chinese rival sells a similar wafer machine and won the first court round; the appeal is pending.
• Orders can slip In fiscal 2024 one customer's slower orders cut the forecast by a third within nine months.

What would change our view

1. Unattractive→NeutralA second AI processor maker orders

   It needs all of:

   • ○The second AI chip maker now in trials orders Aehr's machines for production.watched as it happens
   • ○Aehr keeps its forecast of $130M to $150M of sales for the year to June 2027.checked at the next results, due by 6 Nov
2. Unattractive→NeutralThe price has met the SiC peak's, and the guide holds

   It needs:

   • ○Aehr keeps its forecast of $130M to $150M of sales for the year to June 2027.checked at the next results, due by 6 Nov

What is coming

• 6 November 2026 Q1 fiscal 2027 results: Whether revenue is ramping toward the $130M to $150M guide, what bookings did after the AI orders, and whether gross margin recovered.