Aeluma: Why the Recent Share Price Dip Presents a Strategic Entry Point for Long-Term Investors

Aeluma (ALMU)'s share price has recently declined by 36% over the past three months, reigniting discussions about its valuation and future potential. For value investors, this dip might present an opportunity to acquire a high-growth semiconductor play situated at the intersection of two of the most dynamic markets: artificial intelligence (AI) and defense technology. Although Aeluma's current Price-to-Sales (P/S) ratio of 43.9x appears high in comparison to industry averages, its revenue growth trajectory, strategic partnerships, and alignment with secular trends indicate the stock is undervalued in relation to its future potential.

Aeluma's Strategic Position in AI and Defense Markets

Aeluma's business model is centered on leveraging cutting-edge semiconductor technologies for AI and defense applications. For fiscal year 2025, the company reported revenue of $4.7 million, a 410% increase from the prior year, driven by R&D contracts with entities like NASA, the U.S. Navy, and the Department of Energy. These partnerships highlight Aeluma's ability to secure high-margin, government-backed projects in critical innovation sectors.

The AI semiconductor market is a major tailwind for Aeluma. Global AI semiconductor revenue is projected to grow at a 15.2% compound annual growth rate (CAGR) from 2025 to 2034, reaching $232.85 billion by 2034. Aeluma's focus on gallium nitride (GaN) and silicon carbide (SiC) technologies—materials crucial for high-performance computing and energy-efficient systems—positions it to benefit from this surge. For context, NVIDIA's Q3 2025 data center revenue alone surged 112% year-over-year to $30.8 billion, demonstrating the explosive demand for AI infrastructure.

In defense, the U.S. semiconductor market is anticipated to grow at a 7.3% CAGR through 2030, driven by advanced materials and high-voltage applications. Aeluma's recent $1.5 million contract with the U.S. Navy for GaN-based power amplifiers underscores its relevance in this space. With geopolitical tensions heightening the need for secure, domestically produced semiconductors, Aeluma's niche expertise could become increasingly valuable.

Valuation: High P/S, But Justified by Growth?

Aeluma's P/S ratio of 43.9x is indeed elevated compared to the semiconductor industry average of 4.5x and a peer average of 4.8x. However, this metric must be contextualized against the company's revenue growth and sector dynamics. Aeluma's second-quarter 2025 revenue surged 500% year-over-year, and it raised its full-year revenue forecast by 10%. Such growth rates are uncommon in traditional semiconductor segments, which are struggling with oversupply and weak demand in automotive and consumer electronics markets.

The company's valuation also reflects investor optimism about its long-term potential. While Aeluma remains unprofitable—reporting a $3 million net loss for FY2025—its losses are attributed to strategic R&D investments and operational scaling, not inefficiency. By comparison, defense semiconductor peers like ON Semiconductor trade at a P/S of 3.34x, while the broader U.S. semiconductor industry has a P/S of 13.2x as of November 2025. Aeluma's premium valuation suggests the market is pricing in its dual exposure to AI and defense, sectors with stronger growth and margin profiles than traditional chipmaking.

Risks and the Path Forward

Aeluma's path to profitability is not without risks. Its GAAP net loss widened slightly in Q2 2025, and it faces competition from larger players with deeper R&D budgets. Additionally, the semiconductor industry is navigating supply chain constraints and geopolitical headwinds, such as U.S. export restrictions on high-end GPUs to China, which have impacted even industry leaders like NVIDIA.

However, Aeluma's recent appointment of Christopher Stewart as CFO signals a strategic shift toward commercialization and financial discipline. Stewart's experience in scaling tech companies could help balance R&D investments with revenue-generating initiatives. Meanwhile, Aeluma's FY2026 revenue guidance of $4–6 million—despite a challenging macroeconomic environment—demonstrates confidence in its ability to monetize its technology.

Conclusion: A Dislocation to Exploit

The recent share price dip, while challenging for short-term holders, creates an appealing entry point for long-term investors. Aeluma's combination of high-growth revenue, strategic positioning in AI and defense, and a valuation that reflects both its current performance and future potential aligns with the principles of value investing: buying high-quality assets at a discount to their intrinsic value. As AI-driven demand for advanced semiconductors accelerates and defense budgets expand, Aeluma is well-positioned to capitalize on these megatrends. For investors with a multi-year horizon, the current pullback offers a rare opportunity to participate in a company that is building the infrastructure of tomorrow.