Aehr Test Systems, Inc. (NASDAQ:AEHR) experienced a sharp decline on Thursday, with shares tumbling approximately 21% to $66.74, near their intraday low of $66.38. The stock opened at $84.20 and briefly touched $87.51 before reversing sharply, marking a 24% swing from peak to trough in a single session. The sell-off reduced the company's market capitalization to roughly $2.05 billion.
The catalyst for the move was the final reconstitution file from FTSE Russell, which placed AEHR on the list of deletions from the Russell Microcap Index. The newly reconstituted indexes, which now operate on a semi-annual schedule, took effect after the U.S. market close on June 26. This forced selling from index-tracking funds and other benchmark-aware investors, contributing to the outsized decline.
The broader market context offered little support. The Invesco QQQ Trust (NASDAQ:QQQ) fell about 2.3%, while the iShares Russell 2000 ETF (NYSEARCA:IWM) declined roughly 1.3%, indicating that Aehr's drop was far more severe than the general market weakness.
Even after the steep decline, Aehr's valuation remains elevated. Based on the company's guidance for fiscal 2026 revenue on the high side of a $45 million to $50 million range, the stock trades at approximately 41 times that figure. This multiple implies that investors are betting heavily on a revenue ramp in fiscal 2027, driven by orders from AI processor and silicon photonics customers.
Aehr reported fiscal third-quarter revenue of $10.3 million, down from $18.3 million in the same period last year, and posted a GAAP net loss of $3.2 million. However, bookings were strong at $37.2 million, representing 3.6 times quarterly revenue, and backlog stood at $38.7 million, with an effective backlog of $50.9 million after later bookings. Chief Executive Gayn Erickson noted in April that a record $41 million follow-on order from a lead hyperscale customer brought second-half bookings to more than $92 million, with deliveries expected to begin in fiscal 2027.
The company's most recent corporate update, a June 17 order announcement, did not include any guidance cuts. Aehr disclosed a follow-on production order for a fully automated FOX-XP wafer-level burn-in system configured to test nine wafers in parallel, destined for a major silicon photonics customer. Erickson described the order as evidence of "the urgency of the production ramp now underway."
For investors, the key question remains the timing of revenue conversion. While the order book has improved significantly, the latest quarterly revenue was still below year-ago levels, and the company is not yet profitable on a GAAP basis. At a roughly $2 billion market value after Thursday's drop, the stock continues to price in a steep ramp from AI processor and silicon photonics customers, with fiscal 2027 expected to carry the multiple.
With the Nasdaq observing a closure on July 3 for Independence Day, Thursday marked the last regular U.S. equity session before the long weekend, adding to the pressure on Aehr shares.
