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Shares in Aehr Test Systems (NASDAQ: AEHR) declined by 25.7% in the week to Friday morning. The move comes after its second-quarter 2025 earnings report and management's commentary on its outlook for the year disappointed the market.
Long-term growth prospects but near-term uncertainty
Aehr is known for its silicon carbide wafer level and test burn-in systems that help chip manufacturers improve productive efficiency. Sales to the silicon carbide chip market have made up 90% of Aehr's sales in the past. Given that about 70% of silicon carbide chips go to the electric vehicle (EV) and EV charging infrastructure market, Aehr is heavily dependent on spending on EVs.
Unfortunately, that's been a difficult place over the last year as automakers have cut production plans in the face of disappointing EV sales. Moreover, on the earnings call, CEO Gayn Erickson told investors, "Based on recent market forecasts and large suppliers of silicon carbide semiconductors, growth in silicon carbide sales outside of China should remain challenging before recovering in calendar 2026."
As such, investors should prepare for a challenging year in Aehr's core market. Meanwhile, Erickson described himself as being "cautiously optimistic" about China and noted trade and intellectual property risks associated with the market, and management spoke of higher legal fees in connection with protecting intellectual rights.
What's next for Aehr Test Systems?
Despite the disappointing outlook in silicon carbide, it's far from doom and gloom for the company. The company made waves recently by signing its first deal for $10 million in initial orders for test and burn-in equipment for an artificial intelligence (AI) customer (a large-scale data center hyperscaler). In addition, Aehr is looking to expand in the gallium nitride semiconductor market (one with broad-based industry exposure), and that will also help diversify its revenue streams.
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