AEM share price in power rally
What a power rally! Following the release of the FY2025 full-year financial result, AEM share price turned on the style to stage a power rally – an increase of a mighty 44% within 2 days!
The superb form of AEM share price certainly caught the attention of the investment community. For far too long, this counter has lost its way big time due to its heavy reliance on key customer, Intel. Consequently, many investors had thrown in the towel, having lost all hope of a potential recovery of AEM share price. Indeed, AEM share price has yet to restore to all-conquering form nor its glory days till today. Hence, you can imagine the bitter-sweet feeling of existing shareholders as AEM share price soared 80% year-to-date.
The recent bullish form of AEM share price must have brought back fond memories for long-term investors as the stock used to enjoy similar stellar runs during the 2021 – 2022 period. Back then, driven by the demand surge for PCs due to the pandemic, AEM posted record revenue of $870 million and net profit of $127 million in 2022. Those good old days must be so surreal for investors.
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The current revival of AEM share price was attributed to the recovery of the semiconductor test equipment maker’s Test Cell Solution (TCS) segment. After years of heavy investment in R&D, AEM managed to achieve success in diversifying its customer base through secure of new customers. In its FY2025 results (released Feb 2026), AEM highlighted growth from a second AI/HPC customer (distinct from the new anchor and Intel) that is ramping up high-volume manufacturing. This data confirms that they now have at least two major players in the AI/HPC space in addition to Intel.
AEM also mentioned that demand from the second AI/HPC remains robust and that “revenue contribution is anticipated to grow significantly in FY2026, en route to becoming the Group’s new top customer by revenue”.
The turnaround of AEM’s business is largely driven by the massive capital expenditure by Big Tech on building AI infrastructure. In my previous article, I have highlighted that I am cautiously optimistic that AEM share price would turn bullish in 2026 as the Group rides on the wave of AI growth. It turns out that I am right as the latest financial result validates my belief that 2026 will be pivotal for AEM.
For AEM share price, the business recovery took place at the right time and right place as the company banks its System Level Test (SLT) solution firepower in the rapidly expanding memory test segment. The pivot is presumably due to Micron’s plan to build a $9.5 billion High Bandwidth Memory (HBM) chip manufacturing plant in Singapore. The plant is expected to start operations in 2026.
In the latest earning update, CEO Samer Kabbani explicitly stated that AEM is extending its momentum into memory test, confirming that customer validation is currently on track, with production expected to ramp up in late FY2026.
In this blog, I have always maintained that on its day, AEM share price can be unbeatable. Conversely, when the tide goes against AEM share price, the counter can spiral out of control. On this note, this counter is really not for the faint-hearted. Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. I am vested in this counter, so my views on AEM share price may be biased.
AEM share price in make-or-break year
If the past few years were about laying a foundation for future growth, then 2026 onwards would be reaping what has been sowed as AEM shifted from being “the Intel tester company” to a “diversified AI infrastructure play”. For FY2025, the full-year revenue rose 5% to $399 million on the back of the ramp-up of a new “strategic AI/HPC customer”. After a hiatus in 2024, the company just announced a resumption of dividend pay outs for FY2025 earnings amounting to 1.3 cents per share. While not a significant amount, the dividend is a signal by the management that the bleeding has stopped. It also sent a signal that the 2024 inventory crisis is over and the slump in Intel orders are officially in the rear-view mirror.
The turnaround also led to AEM taking the opportunity to strengthen its balance sheet. In 2025, AEM focused on debt reduction. They generated S$133 million in operating cash flow and used it to slash their loans by over 80%. This led to a reduction in Debt-to-Equity, which dropped from 0.2x to a microscopic 0.03x. This resulted in AEM transitioning to a net cash position. The solid operating cash flow was due to the 23.5% reduction in inventories arising from the fulfillment of orders that had been pulled in under a non-cancellable, long-dated purchase agreement with a key customer, presumably Intel.
Net profit jumped 47.8% year-on-year to $17.1 million. Although the net profit is decent, my concern is mainly on the net profit margin of just 4.3%. During the boom years in 2021-2022, the net profit margins used to be double digits, hovering between 14 to 16%. However, it is important to note that AEM was running a high-volume, highly optimized production line for Intel in 2021-2022. As Intel transitioned to a different technology cycle, AEM’s factory utilization dropped.
In my view, the Contract Manufacturing (CM) segment may also be the culprit for the single-digit net profit margin. The CM business is actually CEI, which AEM acquired in 2021. When it was listed in SGX, data showed that CEI’s net profit margins were typically between 8 – 9%.
Going forward, I foresee net profit margin for AEM could possibly hit 10% as its factory utilization increased from the ramp up of its 2 new AI/HPC customers in 2026. Additionally, the TCS segment should contribute higher revenue as compared to CM with the volume ramp ups from the new customers.
All road leads to R&D
The ongoing patent dispute with Advantest vindicates my belief that the key battle in semiconductor industry lies in the intellectual property. AEM’s proprietary Thermal Control Technology is considered its “crown jewel” that provides the company the competitive advantage to gain market share. As AI and High-Performance Computing (HPC) chips become more powerful, they generate extreme heat. AEM’s patented ability to test these chips under precise thermal conditions without damage has allowed it to win major contracts with “next-gen” AI customers, diversifying away from its historical reliance on Intel
In 2025, AEM continued to double down on R&D activities as the R&D expenses increased 1% to $23.8 million. The investment appears to pay off as the FY2025 revenue hit S$399 million, driven by a “second major AI/HPC customer” which now accounts for over 25% of their Test Cell revenue.
On the other hand, AEM is embroiled in yet another lawsuit from AEM’s competitor, Advantest, who is suing AEM over alleged infringement of 2 patents relating to wafer-level test systems.
AEM claims that the patents relate to a specific wafer level test system that is not practiced by the company and that it strongly denies the allegations in Advantest’s complaint. AEM has already retained U.S. counsel to defend itself against Advantest’s claims, which lack merit.
It all seems like déjà vu to me as the Advantest has previously sued AEM over patent infringement in 2021. In that saga, AEM has paid Advantest US$20 million in two instalments. Additionally, that was a long drawn-out legal battle, causing AEM to incur massive legal fees. According to DBS research, AEM incurred $11.1 million/$27.0 million/$9.0 million in FY21/22/23 vs $5.1 million in FY20 and $9.2 million in FY24. Both the legal fees and arbitration settlement have weighed on AEM’s financial performance in recent years, plunging the company into turmoil.
The company also maintained that “the filing of Advantest’s latest complaint does not affect AEM’s business operations, its existing commercial offerings or products, or its ongoing ability to serve its customers. The Company maintains its revenue guidance for 2H 2025 as previously announced on 13 Aug 2025”. Notwithstanding the stance made by AEM, I do think that its too premature to claim that the latest lawsuit will not have material impact on the reputation of AEM given that it is still a relatively unknown player in the global stage. For this reason, I do think that investors should thread with caution.
Conclusion
It is not a secret that AEM has been struggling to turn around the corner for the past few years. Despite the challenges, Temasek Holdings has not trimmed its stake in AEM. This is unlike the rest of the substantial shareholders like Malaysia’s EPF and Aberdeen, which had pared down their stakes in AEM in the past few years in order to reduce their risk exposures. The steadfast conviction of Temasek Holdings in AEM might be puzzling for many investors. Yet, in my perspective, I believe that conviction could be driven by Singapore’s government.
If you look back over the decades, Singapore has not produced many innovative products at the global market stage, probably due to the very small talent pool. Against this backdrop, AEM Holdings must have attracted the attention of the Singapore government with its various technology patents to support the System Level Test 2.0 solutions for the semiconductor industry
Those who had sold off their stakes in AEM were either disillusioned with the business performances of the company or have moved on to other counters which may provide better returns. I would be lying if I said that the thought of exiting this counter has not crossed my mind but cutting losses is not an option for me as the losses that would be incurred would be substantial.
The macro-economic fundamentals have turned favorably for AEM but the looming Advantest lawsuit could throw a spanner in the works for AEM’s business recovery. That said, the long-term potential of AEM is there but existing investors need to have strong holding power to withstand this winter. In this regard, I am cautiously optimistic that AEM share price may turn super bullish in 2026. Till then, enjoy the ride.
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