Prosper Stars & Stripes, a long/short equity fund, recently released its first-quarter 2026 investor letter. A copy of the letter is available to download here. In Q1 2026, the portfolio underperformed with a net return of (-5.6%) compared to the Russell 2000 Index’s +0.9% return and the HFRX Equity Hedge Index’s -1.5% return. Long book performance was negative, while the short book contributed positively. Geopolitics significantly influenced the first quarter, contributing to increased inflation pressures and elevated energy prices. Additionally, you can review the Portfolio’s top 5 holdings to see its best picks for 2026.
In its first-quarter 2026 investor letter, Prosper Stars & Stripes highlighted Aehr Test Systems, Inc. (NASDAQ:AEHR). Aehr Test Systems, Inc. (NASDAQ:AEHR) is a leading semiconductor test equipment company. On June 18, 2026, Aehr Test Systems, Inc. (NASDAQ:AEHR) closed at $115.30 per share. One-month return of Aehr Test Systems, Inc. (NASDAQ:AEHR) was 21.34%, and its shares gained 934.08% over the past 52 weeks. Aehr Test Systems, Inc. (NASDAQ:AEHR) has a market capitalization of $3.63 billion.
Prosper Stars & Stripes stated the following regarding Aehr Test Systems, Inc. (NASDAQ:AEHR) in its Q1 2026 investor letter:
“Aehr Test Systems, Inc. (NASDAQ:AEHR) was the largest detractor in our short book in the quarter. The company provides equipment for testing, burn-in, and stabilization of semiconductor devices at the wafer level. While this method offers theoretical efficiency advantages, it remains a niche solution with limited broad-based adoption. Our view is supported by several factors. First, the company exhibits significant customer concentration, with ON Semiconductor accounting for approximately 80% of revenue. Second, the Aehr use case is predominantly confined to a single use case: silicon carbide (SiC) devices used in electric vehicle applications. Third, the company’s financial performance reflects this narrow exposure: Aehr generated approximately $59 million in revenue in FY2025, down 11% year-over-year, and consensus expectations point to a further 17% decline in FY2026 to roughly $50 million. This is a contrast to management’s emphasis on growth opportunities in areas such as AI and silicon photonics. Taken together, the combination of declining revenue, lack of profitability, and limited success expanding beyond its core SiC testing niche for EVs suggests to us that Aehr’s business reality is weaker than the optimistic assumptions required by its high multiples. However, either our thesis is misplaced, or our timing premature, and we adhered to our risk management discipline and covered the position.”
Aehr Test Systems, Inc. (NASDAQ:AEHR) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 25 hedge fund portfolios held Aehr Test Systems, Inc. (NASDAQ:AEHR) at the end of the first quarter, up from 17 in the previous quarter. While we acknowledge the risk and potential of Aehr Test Systems, Inc. (NASDAQ:AEHR) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AEHR TEST SYSTEMS, INC. (NASDAQ:AEHR) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Aehr Test Systems, Inc. (NASDAQ:AEHR) and shared the list of small-cap stocks that are on fire. In addition, please check out our hedge fund investor letters Q1 2026 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
