Here's Why Shares in Aehr Test Systems Fell This Week

Motley Fool
31 Jan
  • The bullish case for Aehr Test Systems received a blow this week, but it might not prove material.
  • The company's core silicon carbide end market will be weak in 2025, and it needs to demonstrate that it can grow outside of that segment to convince investors that it's on the right track.

Shares in semiconductor testing equipment company Aehr Test Systems (AEHR 4.81%) slumped by 8.6% in the week to Friday morning. The move came as the market digested the news of Chinese start-up DeepSeek's release of its updated artificial intelligence (AI) models.

Why it matters to Aehr Test Systems

The news is relevant to the company because investors hope that growth in the AI processor market (Aehr recently signed up its first AI customer) will help offset weakness in its core silicon carbide chip market over the near to medium term.

DeepSeek's low-cost AI solutions threaten U.S. AI companies and, in turn, the companies that provide them with infrastructure and technology solutions. This includes the AI processors that need the wafer-level burn-in test equipment Aehr offers. Indeed, Aehr wants to grow into this market to help diversify its revenue streams.

Aehr's core market (traditionally about 90% of its revenue stream) is the silicon carbide wafer-level test and burn-in equipment market. This market is dominated by demand for electric vehicles (EVs) and EV charging networks, contributing 70% of market demand.

Unfortunately, it's a market whose near-term growth is challenged by disappointing EV sales due to ongoing relatively high interest rates. Indeed, management already told investors on an earnings call this year that "growth in silicon carbide sales outside of China should remain challenging before recovering in calendar 2026."

Image source: Getty Images.

Aehr Test Systems in 2025

There's a healthy bull-and-bear debate over Aehr Test Systems, and the bull case suffered a setback this week. Still, it's not clear that the growth of DeepSeek's AI won't actually lead to a pickup in the adoption of AI applications. That would probably be more of a plus than a negative for AI processor companies and, in turn, Aehr's efforts to sell into it.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Most Discussed

  1. 1
     
     
     
     
  2. 2
     
     
     
     
  3. 3
     
     
     
     
  4. 4
     
     
     
     
  5. 5
     
     
     
     
  6. 6
     
     
     
     
  7. 7
     
     
     
     
  8. 8
     
     
     
     
  9. 9
     
     
     
     
  10. 10