Oliver | MMMT Wealth
Founder of MMMT Wealth, CPA, Technical/Fundamental Analysis
FormFactor's role as a chip-test supplier to Nvidia underpins the case, and the chart recently formed a double bottom at the 200-day moving average. x.comÂ
FormFactor is rated Buy amid the AI sector crash because it is important for HBM, advanced packaging and CPO, where its testing raises yields. Foundry test intensity is only set to increase as production grows. x.comÂ
Quantum computing's suppliers get paid whoever's machine wins, as steel mills did while most railroads went bankrupt. Chips, test benches, cryogenic freezers, inspection, lasers, vacuum gear and light must be bought regardless. Washington signed nine letters of intent worth about $2.013 billion before any machine was built, half to the one recipient with a working foundry. Only one name is in its buy zone; the rest await lower prices. Two flat quarters of cryogenic and control orders ends it. … Show more
FormFactor's new Pharos optical probe series is important news and potentially a major re-rating enabler. Launched September 23 for silicon photonics and co-packaged optics testing, it combines low-loss coupling, precise alignment, automated calibration and repeatability in a single probe family, per another investor's summary. x.comÂ
FormFactor's production-ready wafer-level CPO probe gives it a test opportunity at a major foundry, but that business depends on one customer. CEO Mike Slessor says the CPO piece flows through a foundry worth 10% of sales; he did not name it, though an analyst named TSMC. Triton tests photonic wafers before stacking; post-stack test remains difficult. FormFactor expects CPO test revenue to significantly exceed $20m this year and estimates a $400m market by 2030. x.comÂ
FormFactor is expensive against its earnings, trading at about 38x when chip-equipment makers usually get 18x. Fair value sits at $60.06 to $76.44, or 18x next year's $3.79 EPS give or take 12%, so at $145.97 the price is about 91% above fair. The valuation also leans on the forecast, with forward EPS 177% above trailing. This is a levels-only read off reported earnings and revenue estimates, with no fundamental work. x.comÂ
FormFactor sits in test and packaging, the best corner of semiconductors this year, where much quiet money is being made in the layer that makes compute functional. It makes the probe cards that test chips and ranks first globally in test subsystems. Last quarter set a revenue record, up 32%, with gross margin up 510 basis points to 49% and EPS beating by 33%. DRAM probe card revenue hit a record on HBM, a product sold out through 2030. x.comÂ
Quantum component and foundry suppliers such as GlobalFoundries have been the better way to own the quantum cycle than pure plays. Over the past year the four quantum pure plays averaged -10.6% while seven component and metrology names, including GlobalFoundries, averaged +156%, and the Defiance Quantum ETF rose 54.9%. Most of the component gains, though, came from AI demand. US Commerce Department equity funding lowers financing risk for the industry, not technology risk. x.comÂ
FormFactor could see probe-card orders ahead of KYEC's new test floor because cards are built for each chip design. Nvidia plans to double chip-test capacity from 2026 to 2027 and is advancing $1.1bn to KYEC for US facilities targeting volume production in April 2027. Orders could land between now and early 2027; FormFactor's Oct 28 call is the first chance to hear whether they have started. x.com x.com x.comÂ
FormFactor's rebounding free cash flow and operating margins suggest it is making the right moves in the tough, competitive chip-testing segment. Against ASML, the segment's beast, FormFactor has better growth and a 40% lower PEG. The chart is ready to move again, with a pattern target of 143 versus an all-time high around 160. x.com x.comÂ