Aehr Test Systems: The Undervalued Play in the GaN Semiconductor Boom

The semiconductor industry is undergoing a seismic shift, with wide bandgap materials like gallium nitride (GaN) and silicon carbide (SiC) emerging as linchpins for next-generation power systems. Navitas Semiconductor's (NVTS) recent surge—driven by its partnership with NVIDIA to power AI data centers—has demonstrated how strategic alliances can unlock massive value. Now, Aehr Test Systems (AEHR), a leader in semiconductor test and burn-in solutions, is positioned to replicate this success by leveraging its entry into the high-growth GaN market. With undisclosed collaborations gaining momentum and the AI-infrastructure boom accelerating, Aehr's stock could be the next undervalued play to watch.

The GaN Opportunity: Aehr's Untapped Catalyst

GaN's rise as a critical material for high-efficiency power conversion is undeniable. These semiconductors, used in everything from fast chargers to electric vehicle inverters, are projected to grow at a 40% CAGR, hitting $2.5 billion in annual sales by 2029. Aehr's recent production order from a top-tier automotive semiconductor supplier underscores its pivot into this market. The company's FOX-XP system—capable of testing up to nine wafers in parallel—has been validated for GaN qualification, positioning Aehr as an indispensable partner for manufacturers scaling GaN production.

The parallels to Navitas' trajectory are striking. Just as NVIDIA's endorsement of Navitas' GaN/SiC power supplies sent its stock soaring, Aehr's role in enabling GaN device testing could trigger a similar inflection point. Consider this:
- Undisclosed Collaborations: Aehr has been working with its automotive customer for over a year, with the supplier already purchasing thousands of FOX WaferPak Contactors under an evaluation agreement.
- Scalability: The FOX-XP system supports wafer sizes from 6 to 12 inches, aligning with the industry's shift to larger wafer fabrication.
- Acquisition Synergy: The 2024 acquisition of Incal Technology has bolstered Aehr's expertise in high-power testing, directly addressing AI chipmakers' demands for reliability in extreme voltage/temperature conditions.

Why Aehr's Moment is Now

While Aehr's stock has yet to reflect its GaN potential—trading at a fraction of its 2021 highs—key metrics suggest a breakout is near.
- Financial Strength: Q1 2025 bookings of $16.8 million and a $16.6 million backlog indicate rising demand. Management reaffirmed fiscal 2025 guidance for $70 million in revenue and 10% net profit margins, signaling confidence in GaN's contribution.
- AI Infrastructure Tailwinds: The same data center power efficiency race that propelled Navitas is now Aehr's playground. As NVIDIA's Kyber systems and hyperscalers adopt GaN-driven HVDC architectures, Aehr's test systems will be essential to scaling these technologies.
- Undervalued Multiple: At a current P/S ratio of ~1.5x, Aehr trades at a discount to peers like Teradyne (TER) or Kulicke & Soffa (KLIC), despite its niche position in a $2.5B market.

Risks and the Case for Action

No investment is without risk. Aehr's stock could face headwinds from semiconductor demand volatility or delays in GaN partnerships. However, the asymmetry here is compelling:
- Catalyst Visibility: The first production orders from its automotive customer are likely to crystallize in late 2025 or early 2026, offering a tangible milestone.
- Margin Upside: The $50 million fiscal 2025 revenue guidance leaves room for upside if GaN adoption accelerates.

The lesson from Navitas' journey is clear: early exposure to partnerships that redefine industry standards can generate outsized returns. Aehr's undisclosed collaborations are the equivalent of Navitas' NVIDIA deal—only now in the testing infrastructure space. With GaN's adoption curve steepening and AI spending projected to hit $1.2 trillion by 2030, Aehr's stock is primed to reflect this reality.

Final Take: Buy Before the Street Catches On

Investors should consider initiating a position in Aehr at current levels. While the stock may remain range-bound until production orders materialize, the risk-reward here is favorable. Aehr's role in enabling the GaN revolution—coupled with its fortress balance sheet and scalable technology—is a recipe for multi-bagger potential. Don't wait for the next earnings call to confirm what the data already hints at: Aehr is the hidden engine behind the AI infrastructure boom.

The semiconductor sector's next big move isn't just about chips—it's about the tools that make those chips possible. Aehr has quietly become one of those tools. The question isn't whether GaN will dominate; it's whether investors will act before the market does.