Teradyne's Memory Test Surge Reinforces AI Hype, But DeepValue Warns of Overvaluation and Risks

What happened

Teradyne reported $128 million in memory test sales for Q3 2025, a 110% sequential increase driven by AI-fueled demand for HBM and DRAM, offsetting broader memory market weakness. This performance underscores the company's exposure to the AI infrastructure build-out, a key growth driver highlighted in its recent filings. However, DeepValue's report notes that TER's stock has rallied ~130% in six months to trade at ~83x P/E, embedding lofty expectations for sustained AI growth. Despite the strong sales data, the report emphasizes significant risks, including an impending digestion phase as forecasted by competitor Advantest, pricing pressure from aggressive capacity expansion, and export-control threats in Asia. Consequently, while the news confirms near-term momentum, it does not alleviate concerns about overvaluation and cyclical vulnerabilities in Teradyne's core semiconductor test business.

Implication

The 110% sequential jump in memory test sales validates Teradyne's leverage to AI-driven HBM demand, potentially supporting near-term revenue and margin targets. However, with the stock trading at ~83x P/E after a sharp rally, much of this growth is already priced in, limiting upside unless results consistently exceed high expectations. Investors should remain wary of a digestion phase in 2026, as signaled by Advantest's guidance, which could lead to order volatility and margin compression. Export controls and trade restrictions pose ongoing risks to Asian sales, a critical market for Teradyne, adding to cyclical uncertainties. Overall, this news does not justify a shift from DeepValue's 'POTENTIAL SELL' rating; instead, it highlights the need for patience until valuation resets or risks are better managed.

Thesis delta

The news strengthens evidence for AI-driven demand, supporting the bullish growth scenario in DeepValue's report. However, it does not mitigate the core risks of cyclical digestion, competitive pressure from Advantest, and export-control vulnerabilities that underpin the skeptical thesis. Therefore, no material shift in the investment thesis is warranted; if anything, it reinforces the view that current valuations are stretched relative to normalized earnings power.