Nomura resumes coverage of Chroma ATE Inc. with a Buy rating and a target price of TWD2,845

Overview

This report is Nomura's resumed coverage company research on Chroma ATE Inc. The report positions Chroma as a test equipment vendor driven by both rising AI/HPC chip testing complexity and AI server power architecture upgrades, covering businesses such as semiconductor/photonics testing, power electronics testing, and automated test systems. Nomura assigns a Buy rating with a target price of TWD2,845, believing there is still about 33.9% upside versus the closing price of TWD2,125.

Core views

The core views include: first, AI/HPC chips are adopting chiplets, 2.5D/3D advanced packaging, and larger package sizes, causing FT, BIT, and SLT testing scope, test time, and test cost contribution to rise, driving structural growth in semiconductor test equipment. Second, Chroma has positioning advantages in SLT handlers, active thermal control systems, and niche test equipment, benefiting from AI/HPC platform opportunities such as NVIDIA, Google Axion CPU, and AMD MI450, as well as capital spending by TSMC and OSATs on CoWoS and advanced packaging. Third, CPO testing still lacks unified standards and its volume ramp timing remains uncertain, but Chroma's experience in photonics testing may help it enter equipment segments related to test insertion 3 and insertion 4. Fourth, the evolution of AI server power architecture toward HVDC will increase power electronics testing complexity, and Chroma's ATS business is likely to benefit.

Analysis framework

The report uses a combination of top-down and bottom-up methods: it first assesses industry demand from AI/HPC chip architecture, advanced packaging, SLT penetration, OSAT test capacity, and the evolution of AI server power architecture, then maps that to revenue growth in Chroma's semiconductor/photonics testing and ATS businesses, and finally values the company using 2027-2028F average EPS and a target P/E multiple.

Methodology notes

• Valuation methodsP/E multiple

  P/E valuation based on 2027-2028F average EPS

  The target price of TWD2,845 is based on 2027-2028F average EPS of TWD74.9 and a target P/E of 38x; this multiple is toward the higher end of Chroma's historical 14-58x trading range, which the report believes is supported by high earnings growth.

• industry_analysisAI/HPC semiconductor test content expansion

  Expansion of AI/HPC test content

  The report explains the structural rise in semiconductor test equipment demand through chip complexity, package area, SLT test time, FT/BIT/SLT cost mix, and OSAT throughput requirements.

• industry_analysisHVDC power architecture transition

  AI server power architecture evolving toward high-voltage direct current

  The report believes ±400VDC and 800V HVDC racks will increase power testing complexity. Even though there are market concerns about the pace of HVDC adoption, long-term testing demand remains favorable for Chroma's ATS business.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Chroma ATE Inc. (2360.TW)

  Core covered name and beneficiary of AI/HPC semiconductor testing and AI server power testing

  Strengths

  Experience in SLT handlers, active thermal control, niche SoC testing, power electronics testing, and photonics testing; benefits from AI/HPC platform upgrades, CoWoS expansion, and HVDC power evolution.

  Weaknesses

  Valuation is toward the higher end of the historical range, requiring strong growth delivery; some CPO and HVDC opportunities still face timing uncertainty.

  Comparison

  The report believes Chroma has limited business overlap with Hon. Precision; Chroma is more focused on SLT handlers, while Hon. Precision is more focused on FT handlers. Compared with Advantest and Teradyne, Chroma does not directly pursue the broadest leading ATE market, but focuses on niche applications.

  Risks

  Slower CoWoS and back-end test capacity expansion, slower-than-expected product upgrades or volume ramp from AI chip customers, intensified competition from international test equipment vendors, and weaker-than-expected end demand for AI servers.

• NVIDIA CORP (NVDA.US)

  AI GPU platform upgrades are an important source of demand for Chroma's SLT handlers and growth in test content

  Strengths

  The rising complexity and SLT time of AI GPUs from Hopper and Blackwell to Rubin may increase test content and equipment demand.

  Weaknesses

  Chroma's dependence on NVIDIA-related demand creates concentration risk in customer and platform timing.

  Comparison

  The report uses NVIDIA AI GPUs as an example to illustrate the rise in test cost contribution from Hopper to Blackwell and Rubin.

  Risks

  If platform refreshes, SoIC adoption, or mass production ramp are slower than expected, Chroma-related growth would weaken.

• Taiwan Semiconductor Manufacturing Corp (2330 TT)

  CoWoS and advanced packaging expansion are important leading indicators of demand for Chroma's semiconductor test equipment

  Strengths

  TSMC's capital spending on 2.5D/CoWoS and advanced packaging drives expansion in the OSAT and testing ecosystem.

  Weaknesses

  If advanced packaging capacity expansion slows, test equipment orders may be affected.

  Comparison

  The report views CoWoS investment by TSMC and OSATs as a positive indicator for Chroma's SLT business.

  Risks

  Lower-than-expected CoWoS expansion or volatility in AI/HPC demand.

Key data

• RatingBuyCoverage resumed from Suspended to Buy.
• Target priceTWD2,845Based on 38x 2027-2028F average EPS.
• Closing priceTWD2,125Price date is 2026-07-22.
• Implied upside+33.9%Calculated from the target price relative to the closing price.
• Valuation basis38x average 2027-28F EPS of TWD74.9The target P/E is toward the higher end of the historical 14-58x range.
• EPS forecastTWD43.6/TWD65.6/TWD84.2Corresponding to 2026F/2027F/2028F basic EPS, respectively.
• Revenue growth forecast32% CAGRThe report expects Chroma's overall revenue CAGR.
• Net profit growth forecast45% CAGR over 2025-28FThe report text mentions net profit CAGR for 2025-2028F.
• Semiconductor/photonics testing revenue share38% of 2026F consolidated revenueThe report estimates semiconductor/photonics testing will account for about 38% of consolidated revenue in 2026F.
• Semiconductor/photonics testing growth68% revenue CAGR over 2025-28FDriven by AI/HPC testing, SLT, CPO, and advanced packaging.
• ATS growth43% revenue CAGR over 2025-28FDriven by AI server power upgrades and rising HVDC testing complexity.
• Market cap and trading valueMarket cap USD27,951.6mn; 3-month ADT USD217.9mnFrom the report's key data table.

Impact & implications

If the report's view plays out, Chroma's investment thesis will expand from traditional test instruments and niche test equipment to a key equipment beneficiary in the AI infrastructure capex chain. On the semiconductor side, advanced packaging and AI/HPC platform iterations may compress SLT handler upgrade cycles and raise ASPs; on the power side, HVDC and future more complex architectures such as SST may increase demand for power electronics test equipment. For investors, Chroma's valuation upside depends on the sustainability of AI server and AI chip capex, the pace of major customer platform upgrades, and the competitive landscape in test equipment.

Risks

• Slower expansion of CoWoS and back-end testing capacity.
• Slower-than-expected product refreshes, platform performance upgrades, or volume ramp by end AI chip customers.
• Stronger-than-expected competition from other international test equipment vendors.
• Weaker-than-expected end demand, especially for AI servers.
• Slower-than-expected HVDC deployment.
• CPO testing lacks unified standards and the timing of mass production ramp remains uncertain.

What to watch

• TSMC's and OSATs' 2.5D/CoWoS capital spending and test capacity expansion plans.
• Changes in NVIDIA's subsequent AI GPU platforms, SoIC stacking, and SLT test time.
• Order conversion for new SLT opportunities such as Google Axion CPU and the AMD MI450 series.
• The pace of deployment for AI server power systems evolving from traditional architectures toward ±400VDC, 800V HVDC, and SST.
• Whether revenue growth in Chroma's semiconductor/photonics testing and ATS businesses matches the report's forecasts.
• Competitive progress by Hon. Precision and international test equipment vendors in SLT handlers and the ATC field.