Here's Why Aehr Test Systems Stock Had a Wild Ride in the First Half of 2025

Aehr Test Systems (AEHR) experienced significant stock volatility in the first half of 2025, initially declining 56% due to a slowdown in its traditional silicon carbide (SiC) burn-in market, heavily impacted by reduced electric vehicle investment, which saw its revenue contribution fall from 90% in FY24 to under 40% in FY25. However, AEHR rebounded 77.4% in Q2 after successfully diversifying into new, larger markets, notably artificial intelligence (AI) processor burn-in. This new segment is projected to generate 35% of revenue and is considered by management to be 3-5 times larger than its SiC market, having already secured a major hyperscaler as a key AI customer, fundamentally redefining the company's growth trajectory.

Analysis

Aehr Test Systems (AEHR) experienced extreme stock price volatility in the first half of 2025, reflecting a significant and rapid strategic pivot in its business. The stock's initial 56% decline was driven by a slowdown in its traditional silicon carbide (SiC) wafer-level burn-in (WLBI) market, which is closely tied to electric vehicle (EV) investments. This core market's contribution to revenue plummeted from 90% in fiscal year 2024 to less than 40% in fiscal year 2025. However, AEHR engineered a sharp turnaround, resulting in a 77.4% stock rally in the second quarter. This recovery was fueled by the successful diversification into new end markets, most notably the artificial intelligence (AI) processor burn-in sector, which now accounts for 35% of revenue. The company has secured a 'major hyperscaler' as a key production customer and now has four customers each representing over 10% of revenue, with three of them being in new markets. Management's guidance that its new AI-related markets are potentially 3 to 5 times larger than its legacy SiC market has fundamentally reshaped its growth narrative, shifting its profile from a concentrated EV supply chain player to a more diversified semiconductor test company with significant exposure to the AI buildout.

Key Decisions for Investors

• Investors should re-evaluate Aehr as a company pivoting from a slowing EV-centric SiC market to a high-growth play on AI and gallium nitride (GaN) semiconductor testing.
• Monitor future earnings reports for confirmation of customer ramp-up and revenue diversification, particularly progress with the unnamed 'major hyperscaler' AI customer, which is critical to validating the new growth thesis.
• Given the stock's significant volatility and recent rally, consider if the current valuation fully prices in the execution risk associated with penetrating these new markets against management's optimistic outlook.