Key Points
Aehr Test Systems specializes in stress-testing semiconductors to reduce the number of defective chips leaving factories.
Aehr is seeing increased interest from hyperscalers and has announced some high-profile orders in recent months.
Small revenue numbers mean a single order from a hyperscaler can have a seismic impact on its backlog and realized revenue.
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The stock of Aehr Test Systems (NASDAQ: AEHR) got a lot of attention after rallying almost 681% over the past year. A little over half of that gain came in 2026 alone. Sounds like a stock worth a closer look, right?
Let's take a look at what it does before making any commitment to buy shares. Here's an overview of Aehr Test Systems' involvement with the artificial intelligence (AI) boom and whether it presents a good buying opportunity.
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What does Aehr Test Systems do?
AI chipmakers like Nvidia and Broadcom sell millions of chips per year, but not all of them actually work; a small percentage fail shortly after use. Tech companies accept it as a cost of doing business, but if the failure rate were very high, it might make hyperscalers more wary.
Companies like Aehr Test Systems address this issue by stress-testing microchip batch samples under extreme conditions to catch defects early. This reduces the number of defective chips that leave factories.
The company has been testing its technology through deals with hyperscalers for multiple years and has finally started landing lucrative deals. It reported over $37 million in quarterly bookings in its fiscal 2026 third quarter (ended Feb. 27, 2026) and said that it anticipated a "near-term follow-on production order" from its top hyperscale customer.
Less than two weeks later, that big booking arrived. A record $41 million production order from that hyperscale customer resulted in second-half bookings exceeding $92 million. Aehr Test Systems also announced "a strong pipeline of forecasted customer orders in place."
Earlier this month, management announced another big win: a follow-on production order from what it described as "a global leader in networking products and solutions," a major supplier to the data center optical transceiver market.
Can Aehr Test Systems rally continue?
Aehr Test Systems is gaining more attention for its stress-testing technology, and revenue growth could accelerate significantly. The $92 million in second-half bookings is sizable when compared to the $10.3 million in third-quarter revenue.
The $41 million production order from the lead hyperscaler shows how quickly the backlog and overall revenue can grow. Each order of that caliber will have a seismic impact on revenue, and management is positioning itself to woo multiple hyperscalers.
Investors should try to ignore current revenue growth when assessing the stock. The company's 44% year-over-year revenue decline in the third quarter is related to the prolonged slump in the electric vehicle (EV) market. Chips for EVs won't play as much of a role in Aehr's future results. In its third-quarter press release, the company touts itself as a leading provider of test and burn-in solutions for several industries. That press release lists AI and data centers before mentioning automotive chips.
Aehr Test Systems has an easy path to meaningful revenue increases, but it is a risky stock. A 61 price-to-sales ratio is quite excessive, which has resulted in significant volatility. 10% and 20% dips are quite common for Aehr Test Systems.
However, the steady stream of orders can set the stage for meaningful revenue acceleration, which would result in a more reasonable valuation. Its ability to retain a top hyperscaler and get that customer to raise its order size is a good sign for the future. Investors who are strictly focused on valuation may want to ignore this one, but long-term investors who are excited about the recent surge in AI-related orders may want to give it a closer look.
Should you buy stock in Aehr Test Systems right now?
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Marc Guberti has positions in Broadcom. The Motley Fool has positions in and recommends Broadcom and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
