Cathie Wood owns a $239 million stake in this dividend stock

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Cathie Wood doesn’t typically chase dividend stocks, but Teradyne (TER) represents something different.

The chip-testing giant pays a modest quarterly dividend while sitting at the intersection of AI infrastructure buildout and semiconductor innovation.

That combination has made it one of ARK Invest’s larger positions, with Wood’s firm holding 1.031 million shares worth around $239 million.

For context, Teradyne trades near $232 per share and carries a market cap of roughly $36 billion. The tech stock has climbed by more than 75% over the past year as AI-driven semiconductor demand accelerated faster than most analysts expected.

Cathie Wood is bullish on Teradyne due to rising demand for AI chip testing.Getty Images Bloomberg · Getty Images Bloomberg

Teradyne makes the equipment that tests semiconductors before they ship to customers. Historically, mobile processors drove most of the company’s revenue.

However, in Q3 of 2025, AI-related testing accounted for 50% of Teradyne’s total revenue. By the fourth quarter, that figure jumped to 60%.

CEO Greg Smith said the shift happened faster than anyone anticipated. Smith explained:

The numbers back that up:

Teradyne posted third-quarter revenue of $769 million and expects fourth-quarter sales between $920 million and $1 billion.
That’s a sequential jump of nearly 20% driven almost entirely by AI accelerator chips, high-bandwidth memory, and networking equipment headed into data centers.

Smith broke down the opportunity across three main categories: compute processors, memory chips, and networking gear. All three are expanding rapidly as hyperscalers race to build out AI infrastructure.

Teradyne’s UltraFLEXplus testing system has become critical for AI chip makers. The platform handles complex processors with demanding power requirements and massive pin counts.

As AI chips get bigger and more sophisticated, test times increase, and yields become harder to manage.

That creates an opportunity for Teradyne. The company is working to qualify its equipment with a major GPU manufacturer, a process that typically takes about six months. Smith said they’re in the final phase of that qualification and expect to succeed.

Even a small share of that business would be meaningful.

The GPU customer represents roughly $2 billion of the $6.5 billion semiconductor test market this year.
Capturing 25% of that by 2027 would add significant revenue, though Smith cautioned the ramp will be gradual.

Memory testing is the other major growth driver.

Teradyne shipped $128 million in memory test equipment in the third quarter, more than double the prior quarter’s level.
About 75% came from DRAM testing, with most focused on high-bandwidth memory used in AI systems.

The company’s Magnum 7H platform can test multiple generations of HBM without requiring customers to buy new equipment. That gives Teradyne an edge over competitors whose platforms need to be replaced with each generation shift.

Teradyne also owns Universal Robots and Mobile Industrial Robots, two leaders in collaborative robotics. This segment has struggled lately as industrial automation spending slowed, but a major customer is ramping up in 2026.

The company is building new U.S. manufacturing capacity specifically to serve a large e-commerce customer and to automate warehouse operations.

Smith wouldn’t name the customer, but the scale is significant enough that Teradyne is investing in domestic production to support it.

Robotics revenue was $75 million in the third quarter, essentially flat from the prior quarter. Management expects gradual improvement through 2026 and 2027 as the warehouse automation project scales across North America and Europe.

ARK Invest’s strategy centers on disruptive innovation, and Teradyne fits that profile in two ways.

First, the AI infrastructure buildout is happening at an unprecedented scale. According to a McKinsey report, data center spending could surge to $6.7 trillion by 2030. Every chip going into those facilities needs testing, and Teradyne’s platforms are becoming the standard for next-generation processors.

Second, the company is positioned to benefit from supply chain diversification. Major chip buyers increasingly want multiple sources for critical equipment. Teradyne is winning business as customers seek alternatives to the incumbent test supplier.

Smith pointed out that supply chain resilience matters more when economic growth depends on AI. Gaming chips accounted for a small share of foundry capacity. AI compute dominates it. That shift gives Teradyne the leverage it hasn’t had before.

Teradyne reported third-quarter earnings of $0.85 per share on gross margins of 58.5%. Operating profit was 20.4%. For the fourth quarter, the company guided to an operating profit of around 25.5% at the midpoint.

Free cash flow has been lumpy as the company builds inventory to meet accelerating demand. CFO Sanjay Mehta noted receivables and inventory both increased in the third quarter, but he expects normalized cash generation as shipments stabilize.

According to data from Tikr.com, between 2024 and 2029, Teradyne is forecast to increase:

Revenue from $2.82 billion to $5.09 billion.
Adjusted EPS from $3.22 to $8.85.
Free cash flow from $470 million to $1.23 billion.

Given a quarterly payout of $0.12 per share, Teradyne stock offers you a yield of just 0.20%.

At the current payout, the annual dividend expense is just around $75 million, indicating a payout ratio of just 19% in 2025.

Even if Teradyne doubles the annual dividend through 2029, its payout ratio will be about 12%.

The company returned $575 million to shareholders through dividends and buybacks in the first nine months of 2025, roughly 2.5 times its free cash flow for the period.

Management is maintaining the dividend while using a line of credit to fund operations during the inventory build.

Teradyne will update its long-term financial model soon, but Smith made clear the 2028 targets remain achievable.

The composition will just look different, with far more revenue coming from AI-related testing than originally modeled.

For Wood, that’s exactly the kind of shift worth betting on.

This story was originally published by TheStreet on Jan 27, 2026, where it first appeared in the Investing section. Add TheStreet as a Preferred Source by clicking here.