Shares in semiconductor testing equipment company Aehr Test Systems (AEHR -0.49%) slumped by 8.6% in the week to Friday morning. The move came as the market digested the news of Chinese start-up DeepSeek's release of its updated artificial intelligence (AI) models.
Why it matters to Aehr Test Systems
The news is relevant to the company because investors hope that growth in the AI processor market (Aehr recently signed up its first AI customer) will help offset weakness in its core silicon carbide chip market over the near to medium term.
NASDAQ: AEHR
Key Data Points
DeepSeek's low-cost AI solutions threaten U.S. AI companies and, in turn, the companies that provide them with infrastructure and technology solutions. This includes the AI processors that need the wafer-level burn-in test equipment Aehr offers. Indeed, Aehr wants to grow into this market to help diversify its revenue streams.
Aehr's core market (traditionally about 90% of its revenue stream) is the silicon carbide wafer-level test and burn-in equipment market. This market is dominated by demand for electric vehicles (EVs) and EV charging networks, contributing 70% of market demand.
Unfortunately, it's a market whose near-term growth is challenged by disappointing EV sales due to ongoing relatively high interest rates. Indeed, management already told investors on an earnings call this year that "growth in silicon carbide sales outside of China should remain challenging before recovering in calendar 2026."
Image source: Getty Images.
Aehr Test Systems in 2025
There's a healthy bull-and-bear debate over Aehr Test Systems, and the bull case suffered a setback this week. Still, it's not clear that the growth of DeepSeek's AI won't actually lead to a pickup in the adoption of AI applications. That would probably be more of a plus than a negative for AI processor companies and, in turn, Aehr's efforts to sell into it.
