The semiconductor industry is at the heart of the artificial intelligence (AI) revolution. Without advanced chips and networking components for data centers, developers wouldn't have enough computing capacity to build and deploy AI models. Nvidia, Advanced Micro Devices, and Micron Technology are just a few key suppliers of that hardware.
However, many lesser-known companies operate behind the scenes to supply machines and equipment that make the manufacturing process more efficient. Cohu (COHU +6.30%) is one of them -- its testing and handling systems play a central role in the quality control process, ensuring chips are free of defects before they ship to customers.
Cohu stock has exploded higher by 160% over the last 12 months on soaring demand for its equipment. But all of the analysts tracked by The Wall Street Journal think it's still a buy, and their consensus price target suggests more upside is ahead. Is this the ultimate under-the-radar AI opportunity for investors?
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Cohu's systems are critical to the manufacturing process
Cohu sells equipment to chipmakers for the automotive, computing, mobile, industrial, consumer, and AI markets. The AI opportunity might be the largest in the company's history, and I'll go over some numbers in a moment.
Cohu's Eclipse platform handles the data center chips used in AI workloads, including graphics processing units (GPUs), central processors (CPUs), and high-bandwidth memory (HBM). Eclipse autonomously picks up finished semiconductors post-production and places them in test sockets, where it tests them by simulating real-world operating conditions. Automation is key to this testing process because a manual, human-driven alternative would significantly slow down production.
Then there is the Neon inspection and metrology platform, which closely analyzes the physical condition of memory chips. It uses infrared vision and AI software to identify microscopic cracks, imperfections, and other defects in semiconductor wafers, to ensure they are up to standard before shipping to customers. Neon can spot defects as small as 1 micron -- for some perspective, a human hair is around 70 microns thick.
Cohu is investing heavily in the Neon platform because of how quickly the memory market is moving. Manufacturers like Micron Technology are now shipping HBM4 to AI customers, with HBM5 in the pipeline, and every new generation is more complex than the last. During the first quarter of 2026 (ended March 31), orders soared by 64% year over year in Cohu's inspection and metrology business.
Cohu has a massive order pipeline
Wall Street's consensus forecast (provided by Yahoo! Finance) suggests Cohu will deliver $558.5 million in total revenue in 2026, which would be a 23% increase from the prior year. That would mark an acceleration from the 13% growth it delivered in 2025, so the business has significant momentum right now.
But that picture could get even better, because Cohu has a $750 million sales pipeline from what it calls the high-performance computing segment, which includes AI accelerators, GPUs, and HBM-related customers. None of that $750 million has shown up in the company's financial statements yet, because the customers are still in the engagement and qualification phases of the sales process.
That means Cohu's revenue is likely to see a significant boost in the near future.
Should investors buy Cohu stock?
The Wall Street Journal tracks seven analysts covering Cohu stock, and all seven have given it a buy rating. They have an average price target of $57.43, implying a potential upside of 24% over the next 12 months or so. The Street-high target of $65 implies an even greater potential gain of 40%.
NASDAQ: COHU
Key Data Points
Those returns don't exactly sound explosive for a booming AI semiconductor company, but it's important to remember that Cohu stock is already up 160% over the last 12 months. Therefore, investors who buy the stock today might want to look beyond the next year to maximize their potential returns, and I'll explain why.
Cohu's business isn't consistently profitable, but that appears likely to change thanks to the incredible sales pipeline I highlighted earlier. As a result, Wall Street thinks the company could generate adjusted (non-GAAP) earnings of $0.58 in 2026, placing its stock at a forward price-to-earnings (P/E) ratio of 79.7. For some perspective, that makes the stock three times as expensive as Nvidia, which trades at a forward P/E ratio of 24.1.
However, the Street thinks Cohu could more than double its adjusted earnings to $1.46 per share in 2027, placing its stock at a forward P/E of 31.6. While that still isn't necessarily cheap, the trajectory of the company's earnings could attract a lot of investor interest going forward, particularly if 2028 and 2029 forecasts come in equally strong.
In summary, Wall Street's price targets for Cohu stock are probably achievable, but investors who take a longer-term view of three to five years could reap even greater rewards.
