1 Growth Stock Down 52% to Buy Hand Over Fist Heading Into 2026

The market fell out of love with Aehr Test Systems (NASDAQ: AEHR) after its first-quarter earnings report in early October which saw the company report a mid-teens percentage year-over-year decline in sales, and a GAAP net loss of $2.1 million.

The results pared back a strong run in 2025, and shares of the semiconductor testing company remain 52% off of its all-time high last seen in 2023. Still, this is a company well positioned for growth, with considerable upside potential. Here's why.

The buy case for Aehr Test Systems

I'll cut to the chase. There are three key reasons to buy Aehr Test Systems stock:

• Aehr's former core market, wafer-level burn-in (WLBI) test systems for silicon carbide (SiC) wafers, whose primary end market is electric vehicles (EVs), is likely to return to growth as EV sales continue to grow.
• The company is growing its customer base (which already includes a leading hyperscaler placing multiple orders) and orders for its relatively new testing solutions for AI processors used in data centers and high-performance computing.
• The evidence from other, earlier-cycle, companies such as Teradyne suggests that Aehr's orders and revenue (which tends to be later-cycle) have significant upside potential.

Electric vehicle investment will improve

The SiC WLBI market is Aehr's traditional core market, accounting for approximately 90% of Aehr's business, with customers such as ON Semiconductor contributing to its sales over the years. Unfortunately, EV sales growth has slowed in recent years due to a combination of relatively high interest rates and the removal of incentives, such as the federal EV tax credits in the U.S. and subsidies in Germany, which have negatively impacted EV sales.

Additionally, the rush to invest during pandemic lockdowns has led to numerous new EV models entering the market in a highly competitive environment. Consequently, the news flow over the last couple of years has shifted toward a reduction in current investment -- something that is clearly evident in ON Semiconductor's automotive-related sales.

That said, automakers will surely pick up the pace of investment again. Ford Motor Company's recent $5 billion commitment to investing in EVs and Tesla's recent commitment to significantly ramping up EV production and capital spending in 2026 suggest that this trend is likely to continue.

EV sales continue to grow, and for automakers to remain relevant, they will need to invest in producing new EV models.

Image source: Getty Images.

Aehr's growing customer base and its place in the cycle

While Aehr's sales fell short of market expectations, the company continues to make progress in developing its test systems for AI processors. CEO Gayn Erickson said, "Our lead production customer, a world-leading hyperscaler, placed multiple follow-on volume production orders for Sonoma systems and requested shorter lead times to support higher-than-expected volumes as they ramp up development of their own advanced AI processors."

While it's not clear which of the hyperscalers is Aehr's lead customer, Erickson referred to "Hyperscalers like Microsoft, Amazon, Google, and Meta [Platforms]" on the earnings call and its company presentation lists Microsoft and Alphabet's Google as part of its worldwide customer base.

Moreover, there's reason to believe that recent earnings and guidance from Teradyne presage a pickup in investment. Teradyne's semiconductor-automated test equipment is primarily used for functional and structural testing, tends to be early cycle, and is ordered when chipmakers start ramping up investment. In comparison, Aehr's test systems help chipmakers improve reliability and quality, and its orders tend to flow a bit later in the cycle than Teradyne's.

Image source: Getty Images.

In addition, although Teradyne has broader-based exposure than Aehr, its management expects its 27% year-over-year growth in the fourth quarter to be driven by "artificial intelligence applications and strong performance in memory," according to Teradyne's earnings report.

In other words, in areas (AI) where Aehr is growing. Finally, investment in Aehr's solutions tends to be later because it requires specific investment in scaling a relatively new industry.

Image source: Getty Images.

A stock to buy?

Wall Street analysts expect Aehr's sales to remain flat in 2026, followed by growth rates of 37% and 25% in 2027 and 2028, respectively. Those estimates might prove conservative if EV investment improves and the current pace of spending on AI applications is continued. It all makes Aehr an exciting stock for a growth investor's portfolio.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Tesla. The Motley Fool recommends ON Semiconductor and Teradyne and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.