Shares of electric vehicle (EV) chip stocks Axcelis Technologies (ACLS 0.28%), Coherent (COHR +4.18%), and Aehr Test Systems (AEHR +11.92%) rallied this week, up 13.2%, 15.7%, and 16.3%, respectively, through Thursday trading, according to data from S&P Global Market Intelligence.
Each of these companies plays a part in the production and testing of silicon carbide (SiC) chips, a newer compound that is thought to be a key innovation in expanding the range of EVs. While each of these companies had some good company-specific news this week, positive commentary from leading automotive companies on EV sales lit a fire under the group as well, turbocharging this week's returns.
NASDAQ: ACLS
Key Data Points
A new CEO for Coherent, an upgrade for Axcelis, and prospects for an EV recovery
Axcelis makes ion-implant equipment for the production of silicon wafers that need to be infused with other elements, such as silicon carbide wafers. Coherent is an actual producer of silicon carbide wafers, which it then sells to chipmakers. And Aehr Test Systems makes equipment that tests chips for "infant mortality," or those chips that might fail early on. That's very applicable to SiC modules, which is a novel material that can be difficult to produce in volume and which needs to perform in rugged conditions.
Basically, all of these stocks will be affected by the growth of EVs, the key market for SiC chips. As many know, the EV market had a big slowdown starting in the middle of last year, and these stocks have since cratered:
ACLS Percent Off All-Time High data by YCharts.
However, could the EV market be showing signs of life? This week, General Motors CEO Mary Barra said that GM had its best month of all-electric vehicle sales ever in May. And on Wednesday, Ford disclosed its all-electric vehicle sales were up 65% in May and up 88% through the first five months of the year.
So, the narrative that EV demand may be hitting a wall might be a false one. In a subsequent interview, Barra stated that GM remains committed to an all-electric future. While the transition could play out over "decades," Barra also expressed confidence in the end destination, saying:
We will be just committed because we think in the long term [EVs are] better... And even right now -- I mean, get in an EV and drive it. It's instant torque. You never have to go to the gas station, especially if you have at your home or where you live, whether it's an apartment or your house, you have accessibility charging... I think over the long term when we have a very robust charging infrastructure, people are going to choose EVs, because they're better.
Those positive comments surely helped the entire sector related to silicon carbide, but there were also company-specific news items this week, too.
Image source: Getty Images.
First, Coherent announced that chip industry veteran Jim Anderson would become its new CEO, replacing the retiring Chuck Mattera.
Coherent actually surged on this news Monday even before the comments from GM and Ford. Anderson is well regarded and credited with turning around the smaller Lattice Semiconductor, which has seen its stock rise 10-fold since Anderson took over in late 2018. As evidence of how well regarded Anderson is, Lattice's stock plunged nearly 20% on the day of the announcement.
In addition to the good news at Coherent, Axcelis saw a price-target increase from analysts at Bank of America, who upgraded their price target on shares to $125, up from a prior target of $115. The stock surged from around $111 to $127 this week through Thursday.
Finally, Aehr Test management has been presenting at industry conferences both late last week and this week. Management's optimistic commentary on the future growth prospects for its wafer-level test and burn-in systems may be getting more attention, as the company recently announced new engagements with memory and even AI accelerator customers in addition to its core SiC auto chipmaking customer base.
This part of the chip industry may still be cheap
The parts of the chip industry that serve artificial intelligence (AI) applications are booming right now. But remember, as recently as two years ago, high-performance computing chips were in a big downturn.
The auto chip market is now in its own downturn. But this week, there were signs that things may be bottoming and perhaps turning up. Coherent projects the silicon carbide market to grow at a 28% average growth rate from 2022 to 2030, increasing from $3 billion to $21 billion by then. Therefore, this could be a great moment to pick up shares of EV chip stocks for the long term even after this week's bounce.
