What happened
Shares of Aehr Test Systems (AEHR 3.27%) rocketed 16.7% higher on Thursday.
The manufacturer of test and burn-in equipment has surged this year, as its proprietary burn-in solutions are receiving heavy demand in silicon carbide (SiC) manufacturing. For those new to SiC, this material is seen as a very high-growth area, due to SiC's anticipated adoption across electric vehicles and clean energy infrastructure through this decade.
On Thursday, Aehr announced it had received a large new order under a long-term supply agreement for multiple products from what appears to be a very large customer. The new customer win appears to have led to a renewed jolt of enthusiasm for Aehr today.
So what
Today, Aehr issued a press release disclosing a large order for its FOX-XP multiwafer test and burn-in system, multiple WaferPak Contactors, a WaferPak Aligner, and a high-volume production support kit for a "a multinational industrial conglomerate and manufacturer of semiconductors, including power semiconductors." The new agreement appears to be geared for high-volume production of silicon carbide MOSFETs, or metal-oxide semiconductor field-effect transistors, to be used in electric vehicles, trucks, and train tractor inverters.
Importantly, this is a new customer for Aehr, which has been racking up the customer wins lately. On its recent third fiscal quarter report back at the end of March, the company reported an all-time record in bookings and healthy backlog, which significantly exceeded revenues. So, this new customer win indicates growing business momentum for Aehr's solutions in what appears to be a very high-growth area of silicon carbide production.
Of note, SiC is not the easiest material to produce at scale, so it is unclear which of the actual SiC chip designers and manufacturers will win out in this race. However, as an equipment stock that sells into a lot of these leading producers, Aehr appears to be a nice "picks and shovels" play on the EV boom.
Now what
After today's surge, Aehr trades at 74 times trailing earnings and around 38 times the upcoming year's estimates. However, with the recent customer win and continued momentum, it's possible Aehr could beat those estimates in the upcoming year. Given the long-term opportunity for SiC chip production, it may not be too late to get in on this small-cap stock, despite the stock having more than doubled already in 2023.
For growth investors, Aehr is definitely a stock to watch as it rides what appears to be healthy momentum for a multiyear growth area of SiC production. While the artificial intelligence boom may have gotten the lion's share of attention last month, semiconductor investors shouldn't ignore the booming SiC and gallium nitride (GaN) markets to ride the electrification trend. There appears to be very healthy growth to be had in these trailing-edge technologies, too.
