Aehr test systems NASDAQ: AEHR are small-cap stocks in the semiconductor industry. Instead of designing or manufacturing chips, the company uses hardware in the chip design process. Overall, the company had a very difficult 2024. As of the close of Dec. 16, the stock was down more than 45% for the year. All three earnings reports showed revenue down 25% or more compared to the same 2023 quarter.
Aehr test systems today
Aehr test systems
(As of 12/20/2024 5:40 PM ET)
- 52 week range
- $9.83
▼
US$30.00
- P/E ratio
- 14.54
- Target price
- US$25.00
However, recent news related to AI has investors worried. Craig Hallum analysts are likely feeling much better about the $25 price target they set on the stock after shares soared nearly 26% on Dec. 16. Closing price December 16th.
I’ll talk about what Aehr Test Systems is doing and the news that’s encouraging for the company. I’ll conclude with my overall opinion on whether the stock can realize its strong growth potential.
Aehr: saving chip manufacturers from losing millions due to errors
Aehr Test Systems manufactures semiconductor in-process testing equipment. He exposes them to stimuli to see how well they function under different conditions. This is done at multiple stages of the chip manufacturing process, including the wafer level, the individual die level, and the post-packaging stage. Wafer level refers to testing done while all the chips are still on one large silicon wafer. The wafer is then cut to separate the individual chips in a process called die separation. After this stage, the company also conducts tests to see how each chip performs on its own. Finally, it tests the chips after manufacturers put them in packaging. The packaging allows the chip to connect to other computer components.
The main advantage of this equipment is that it helps chip manufacturers detect problems during production. This ensures consistent chip quality, reliability and durability. This is the key to chipmakers winning customers. This testing can also save these manufacturers a lot of money. By testing chips early and often, manufacturers can eliminate problems and limit the number of defective chips they produce. This saves money on the use of expensive materials such as purified semiconductor grade silicon. In general, chip testing improves the reputation of manufacturers, which leads to an increase in the number of customers. It also reduces production costs, resulting in a more profitable business.
Along with silicon-based chips, the company’s equipment is mainly focused on testing silicon carbide (SiC)-based chips. This indicates the promising nature of the business. SiC-based chips are often considered the future of some parts of the semiconductor industry. Their qualities make them superior to silicon chips in applications such as electric vehicles. The company’s machines can also test chips based on gallium nitride, another semiconductor material of the future.
Aehr’s AI deal is worth more than just money
Aehr’s share price rose sharply on December 16 after the company made a major announcement. The company has reached an agreement with a customer who will use its equipment to test and run artificial intelligence processors. This is the company’s first AI customer to purchase equipment worth more than $10 million. That may not be a huge amount, but it’s equal to 76% of Aehr’s third-quarter revenue. However, this deal represents a big win for the future.
Getting the first AI client gives the company legitimacy in such an important area. This opens the door for further transactions. Aehr says it is the only company in the world that can offer turnkey solutions for testing and testing AI processors at the wafer and package levels. This is a great competitive advantage for this company.
Aehr Test Systems (AEHR) price chart for Monday, December 23, 2024.
Long-term tailwinds mean Aehr shares may just be getting started
Notably, although Aehr is a small company, the company is profitable. He also has virtually no debt. This enables the company to take full advantage of its capabilities in testing and testing AI chips. This should be a strong long-term tailwind for the firm. The same can be said about the company’s focus on the semiconductor materials of the future.
In my opinion, Aehr is a company that not only has the potential to meet its target price, but ultimately beat it. If this deal is just the first domino to fall on Aehr’s path to entering the artificial intelligence market, it could just be the beginning of a rally for the stock.
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