The modern vehicle is undergoing rapid change. Automakers around the world are working on new electric vehicle (EV) lineups. With that change in drivetrain from internal combustion engine to battery-powered motors, other features are being added to EVs, like advanced driver assist systems and in-cabin digital displays.

Basically, electronic components account for a much larger portion of the cost of producing a vehicle. This has been a boon for the semiconductor industry. Two small stocks that are booming right now as a result are indie Semiconductor (INDI -1.62%) and Aehr Test Systems (AEHR -2.58%). Here's why these two EV chip stocks are worth a look right now.

1. Indie Semi's sensors lift financial results higher

Indie Semiconductor is a tiny chip designer solely focused on automotive solutions. This tiny business has exploded onto the scene in the last couple of years. Through the first half of 2022, revenue was up 176% year over year to $47.8 million. This is a tiny business, but at this pace, it won't be for long.  

This chip designer focuses on sensors (it's shipping ultrasound solutions and developing LiDAR, radar, and vision sensors), in-cabin digital display chips, and charging hardware. These are competitive markets. Indie management says the company's competitors include auto supplier bellwethers like NXP Semiconductors and STMicroelectronics, as well as other smaller outfits like Monolithic Power Solutions. Nevertheless, Indie has found a way to carve out a niche for itself and is growing fast.

Two small acquisitions in the last year certainly helped. Last summer, it purchased small photonics company TeraXion to unify its sensor business for driver assist systems, and late in 2021, it bought Analog Devices' radar division Symeo. The addition of these two businesses has helped Indie scale up its operations. Management expects gross margin on products sold to reach the 50% range later this year, up from a mid-40% range in 2021.

As of the end of June 2022, Indie Semiconductor had $164 million in cash and short-term investments, offset by $18 million in debt. The company generated only a small profit of $8 million in the first half of the year (although it lost $33 million on an adjusted basis), so ramping up to a profitable scale will be the most critical thing to watch here in the coming year or two. But with the stock trading at just over eight times expected full-year 2022 sales, Indie Semiconductor stock is worth keeping tabs on right now.

2. Aehr Test Systems provides the equipment EV automakers need

Aehr Test Systems isn't itself a chip developer. However, it provides equipment that is critical to the manufacturing of chips. Specifically, Aehr develops systems that test for failures in a silicon chip before it is integrated into a larger semiconductor or computing unit. Specifically, Aehr is fulfilling massive demand for its equipment from the EV market.  

Stress-testing chips for use in autos is critical, given that a failure can lead to a dangerous situation for a driver on the road -- not to mention high repair costs to replace a failed electronic component in a vehicle. And given that EVs need far more chips than a traditional internal combustion engine-powered car, chip testing is in higher demand than ever. On its last earnings call, Aehr cited a report from researcher Canaccord Genuity that asserts EV market demand for silicon wafers (the flat wafer a chip's circuitry is printed on) will go from 150,000 in 2021 to over 4 million by 2030.  

This demand is already having a dramatic impact on Aehr's financials. In fiscal 2022 (the 12-month period ended May 2022), sales surged 206% higher to $50.8 million. The company also swung to a profit, generating a net income of $9.45 million on the year (or $11.7 million on an adjusted basis). Aehr also reported having $31.5 million in cash and investments and no debt.  

Aehr expects sales to be in a range of $60 million to $70 million in fiscal 2023, implying growth of 28% at the midpoint of guidance. Like indie Semiconductor, Aehr is still early on in turning the corner on profitability but has proven its operations have a lot of potential. Shares currently trade for just over six times expected sales.  

Who should buy these two stocks?

As is the case with all emerging technologies, the EV market is highly volatile. The companies participating in its development -- especially very small ones like Indie and Aehr -- can be even more unpredictable. Bigger competitors could squash their progress, and sales can be cyclical in nature too. If you decide to buy, I'll urge caution. Take a small position, perhaps even buying in small batches over the course of a year. 

Nevertheless, with the EV market soaring and expected to continue growing for the foreseeable future, there's a lot of room for companies like Indie Semiconductor and Aehr Test Systems to grow. These tiny chip stocks are worth keeping on your watchlist at the very least.