AEHR Spikes 36% on Hyperscaler Order—Investors Should Take Notice

Key Points

• Aehr Test Systems just saw shares move up in a big way as the company attracted new orders from an AI hyperscaler.
• Aehr's technology provides a key solution to data center operators, adding significant weight to its investment thesis.
• The firm is also in an evaluation period with another big player in AI that could lead to further orders down the road.

Semiconductor equipment maker Aehr Test Systems NASDAQ: AEHR is far from a headline name in the chip industry.

However, the firm’s recent announcement that sent shares soaring shows it is a name investors should take notice of. 

On Aug. 25, AEHR spiked nearly 36% as an artificial intelligence (AI) hyperscaler expanded its relationship with the firm.

Below, we’ll dive into the details of the announcement and explain why this small-cap chip stock should be on investors' radars.

Aehr’s Sonoma System Gets More Orders from an AI Hyperscaler

On Aug. 25, Aehr said it had received a follow-on order for six of its Sonoma “ultra-high-power packaged part burn-in systems” from a major AI hyperscaler. Let’s break down this complex technological jargon to understand what this really means and why investors should care.

AI hyperscalers like Alphabet NASDAQ: GOOGL and Meta Platforms NASDAQ: META are spending billions each year on AI infrastructure. While NVIDIA’s NASDAQ: NVDA graphics processing units (GPUs) capture much of this spending, so do application-specific integrated circuits (ASICs). These are custom-made AI chips that many hyperscalers are using, with companies like Broadcom NASDAQ: AVGO helping design them.

With such a massive level of investment going into this infrastructure, maintaining multiple levels of quality control is imperative for hyperscalers using ASICs. Aehr’s Sonoma machines play a critical role in this process by performing “packaged part burn-in,” a method that subjects chips to extremely stressful conditions, including high temperatures and elevated electrical loads.

The goal is to identify any chips with inherent weaknesses that are likely to fail once deployed. By filtering out these flawed components, hyperscalers ensure that only the most reliable chips make it into their data centers.

Removing and replacing a defective chip can be expensive once installed and can cause disruptions to the overall system. Thus, Aehr’s Sonoma machines help AI data centers run seamlessly and lower their overall costs. These are compelling reasons for hyperscalers to buy these machines, underscoring the investment case for Aehr Test Systems' stock.

Follow-On Validates Sonoma’s Prowess; FOX-XP Could See Strong Future Uptake

A particularly promising sign for Aehr is that these new Sonoma purchases are follow-on orders. That indicates that this hyperscaler has already used the Sonoma system and found it valuable, causing them to buy more. This reinforces the technological effectiveness of Sonoma and its economic value.

Sonoma’s focus on ASICs also puts Aehr in an ecosystem with one of the most prominent players in the AI semiconductor space: Broadcom. Broadcom has been growing its AI chip revenues at a rate of 60% and believes it can continue this in 2026. This robust demand for Broadcom’s AI ASICs could flow into robust demand for Aehr’s Sonoma system.

Aehr is also working to capture revenue from multiple points in the AI semiconductor manufacturing supply chain. On Aug. 26, Aehr said it received an evaluation order for its FOX-XP system. These systems test chips at the wafer production level as opposed to Sonoma’s package level testing.

Wafer production occurs in semiconductor fabs, like those operated by Taiwan Semiconductor Manufacturing NYSE: TSM. This suggests that TSMC could be the unnamed firm evaluating FOX-XP, especially as Aehr called this firm “a leading AI processor supplier." However, nothing in the press release confirms this.

Additionally, investors should note that this is simply an evaluation order. The customer is paying Aehr to demonstrate the effectiveness of FOX-XP, but may or may not end up actually purchasing the systems. However, the announcement provides clear indication that Aehr’s technology is attracting interest.

This provides potential for Aehr to generate significant demand for FOX-XP in the future. Aehr estimates that the evaluation will take three to six months to complete, meaning that actual orders could start to follow afterward.

AEHR: High-Valuation, High-Potential Chip Stock

Surely, investors will feel alarmed to see that Aehr trades at a forward price-to-earnings ratio of around 222x.

However, with the firm’s adjusted earnings per share often fluctuating from positive to negative territory each quarter, this likely is not the most suitable valuation metric. 

Aehr’s last 12 months price-to-sales ratio of 13x is much less intimidating, but still high. These figures come as the stock has appreciated 89% since MarketBeat last covered it.

Despite these lofty metrics, Aehr continues to have the ability to expand its customer base greatly. It only works with one hyperscaler, while at least seven are currently using or contemplating using ASICs. Overall, these factors position Aehr as a high-risk, high-reward opportunity going forward.