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DBS Group Research has upped its target price for AEM Holdings to $8.90 (from $4.60), following CGS International's recent TP upgrade to $10.15 (from $4.86).
DBS analyst Amanda Tan writes that AEM is undergoing a "structural inflection from single customer centric to multi customer business, with AI emerging as a key tailwind". |
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Furthermore, "CPUs are increasingly re-emerging as a critical foundation of the next phase of AI as workloads evolve".
Because "CPU-to-GPU ratios are around 1:8 in training workloads, improving to roughly 1:3 to 1:4 in inference, and potentially moving to parity or better in agentic AI," AEM’s traditional x86 CPU ties provide an unexpected, multi-year AI upside.
| A Game-Changing Multi-Customer Inflection |
Historically reliant on Intel, AEM is now "at the cusp of a multi-year rollout for new customers".
DBS expects this shift to be transformative, noting they "foresee its customer diversification strategy yielding more significant returns in the years ahead".
This expansion is vast and broad-based.
Notably, "AI fabless customer contributions [are expected] to more than double in FY26," positioning this client as AEM's top overall customer.
AEM is also making headway in the packaged memory market, where "orders of final test handlers are on track with initial revenues expected in late FY26, ahead of a production ramp in FY27".
Additionally, integrating into the OSAT layer through partnership with ASE Technology "expands AEM’s customer base beyond its traditional model," providing indirect access to a fragmented pool of end customers.
| Why $8.90 |
| "Our TP is based on 42x FY27 earnings (vs 32x FY27 earnings previously, in line with global peers given multiple tailwinds in AI, new customers, and margin expansion. Earnings have been raised by 42-56% as the higher revenue base flows through to the bottom line, alongside lower assumed legal fees, margin improvement from a more favourable product mix, and operating leverage." -- DBS Group Research |
Margin Expansion and Explosive Earnings Upgrades
Because of these structural shifts, "FY26/27 earnings [were] revised upward by 42-56% on higher revenue and margin assumptions".
Why the sudden margin leap?
Historically, Intel funded non-recurring engineering (NRE) fees, which offset R&D costs but capped AEM's overall tool margins.
Now, as AEM expands to newer clients that do not fund upfront R&D, "it is able to capture a larger share of the value from its platforms, supporting structurally higher equipment margins".
Adding to this profitability, "the mix of lower margin CEI contract manufacturing is expected to decline from 28% in FY26 to 24% in FY27".
Consequently, DBS notes, "Our net margin assumptions are 9.5-11.6% for FY26-27 (vs 7-8% in our prior forecasts)".
AEM has historically traded at a discount compared to global peers like Teradyne and Advantest due to its heavy reliance on a single client and smaller scale. However, as concentration risk vanishes and high-margin AI revenues pour in, a valuation rerating is entirely justified. DBS explains, "Our TP is based on 42x FY27 earnings (vs 32x FY27 earnings previously), in line with global peers given tailwinds in AI, new customers, and margin expansion". AEM is no longer just an Intel proxy; it is rapidly transforming into a diversified, highly profitable, AI-driven test leader. |
→ See DBS' report here.
→ See also: AEM Was $1.70 at Start of 2026 and Hit $6 Last Week. Now Analyst Says It’s Going to $10
