Track market-moving stories before they get noisy

Key Takeaways Onto Innovation expects advanced nodes business to grow about 25% in 2026, above the industry WFE growth.ONTO sees momentum from logic, DRAM, early NAND recovery and new customer capacity expansions.ONTO expects over 15% sequential revenue growth on rising backlog and broader product adoption. AI, HPC, advanced packaging and next-generation memory are driving unprecedented demand for cutting-edge chips. As manufacturers push toward two-nanometer (2nm) and even smaller process technologies, the need for precision metrology and inspection has been rising. Among the companies benefiting from this trend is Onto Innovation, Inc. (ONTO - Free Report) . Being a semiconductor process control specialist, it has consistently delivered strong financial performance while expanding its presence across advanced logic, memory and advanced packaging. 

Onto Innovation's advanced nodes business continues to gain momentum across both logic and memory markets. The Atlas G6 platform is seeing wider adoption after strong competitive evaluations at leading logic customers, while DRAM manufacturers are increasingly using it for next-generation device development. The company also secured a new TSV metrology application win, with initial shipments expected in the second half of 2026. Supported by strong demand in logic and DRAM, along with early signs of a NAND recovery, Onto Innovation expects its advanced nodes business to grow about 25% in 2026, outpacing industry wafer fab equipment growth.

Per management, advanced nodes' revenues more than doubled in 2025, driven by its strong OCD position with leading global logic and memory manufacturers, despite minimal China exposure. Films and integrated metrology also hit record revenues, with integrated metrology expanding beyond memory to include two leading-edge logic customers. Onto Innovation expects the momentum to accelerate in the second half of 2026, driven by customer capacity expansions, growing product adoption and a rising backlog, supporting more than 15% sequential revenue growth.

If AI-driven semiconductor investment remains resilient and advanced-node manufacturing expands as expected, ONTO appears well-positioned to extend its winning streak as the semiconductor industry transitions to increasingly complex manufacturing nodes.

How Does ONTO Stack Up Against Semiconductor Rivals?KLA Corporation (KLAC - Free Report) continues to benefit from AI-driven spending in leading-edge foundry/logic, HBM and advanced packaging, supporting market share gains in process control and steady services growth that helps anchor cash generation. KLA's advanced systems and longer tool lifecycles are driving high-margin service growth by increasing demand for tool performance and uptime. While KLA cited share gains in electron-beam inspection in 2025, the pace of customer adoption and the relative performance of competing platforms remain key variables at the most advanced nodes. If alternative approaches deliver better sensitivity or throughput economics, KLA may need higher R&D and applications spending to defend its installed base and sustain pricing.

Applied Materials (AMAT - Free Report) remains focused on the process complexity created by gate-all-around transitions and continues leading-edge node investments. In the fiscal second quarter, Semiconductor Systems delivered record foundry revenues, supported by strength in ALD, epitaxy and materials treatments, as customers ramp gate-all-around nodes while also adding capacity at advanced FinFET nodes. Management also emphasized that gate-all-around increases its available market and provides multiple opportunities for share gains in deposition, treatments, conductor etch and e-beam. The product cadence is important because it ties AMAT’s growth to architecture transitions rather than only to wafer starts. However, investments in manufacturing capacity, inventory and logistics to support customer ramps are increasing operational complexity.

ONTO Price Performance, Valuation and EstimatesONTO’s shares have soared 208.8% in the past year, outperforming the Zacks Nanotechnology industry’s growth of 203.9% and surpassing the Zacks Computer and Technology sector and the S&P 500 composite’s growth of 33.9% and 23.8%, respectively. 

Image Source: Zacks Investment Research

In terms of forward price/earnings, ONTO’s shares are trading at 35.11X, higher than the industry’s 6.8X.

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for ONTO has moved up for both 2026 and 2027 over the past 60 days.

Image Source: Zacks Investment Research

Onto Innovation currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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Applied Materials (NASDAQ:AMAT | AMAT Price Prediction) just told the Street its semiconductor equipment business will grow more than 30% in calendar 2026, an upward revision from a prior bar of 20%. That is the sound of an AI fab CapEx supercycle shifting from thesis to invoice, and the picks-and-shovel names selling into every foundry, HBM stack and gate-all-around node are the ones cashing the checks. Five stocks sit directly under that spending fire hose. Here is where the money is moving, in order.

1. Onto Innovation: The Advanced-Packaging Sleeper Onto Innovation (NYSE:ONTO) is the name most retail investors still cannot spell, but it sits at the exact chokepoint AI needs: inspection and metrology for HBM stacks, 2.5D logic and gate-all-around devices. When TSMC and SK hynix bolt an accelerator together, Onto’s Dragonfly and Atlas tools decide whether the die passes or scraps. That is process control leverage on the fastest-growing corner of the fab, well beyond commoditized deposition.

The Q1 FY26 earnings report did the talking. Revenue hit a record $291.95 million, up 9.5% year over year, with the advanced nodes business tracking roughly 25% full-year growth. Onto also locked a volume purchase agreement worth more than $240 million with a leading HBM manufacturer running through 2027. CEO Mike Plisinski flagged “the accelerating adoption of our Atlas G6 OCD system for next-generation logic and memory devices” as the tell.

The stock action agrees. ONTO closed at $321.44 on July 10 after ripping nearly 94% higher year to date and more than 212% over the past year. The analyst target sits at $369.60 with seven of seven analysts at a Buy or Strong Buy rating. The bigger surprise is what a $479 billion incumbent is telling investors about 2026.

2. Applied Materials: The Heavyweight Raising Its Own Bar Applied Materials is the broadest AI-fab exposure in the group. Deposition, ion implant, CMP, epitaxy, advanced packaging: If a wafer moves, Applied touches it. Gate-all-around transistor transitions and HBM DRAM stacking both pull disproportionate dollars per wafer, and Applied’s Precision Selective Nitride PECVD and Trillium ALD tools were built for exactly that geometry.

Q2 FY26 delivered a fourth straight beat: non-GAAP EPS of $2.86 versus $2.66 expected, revenue of $7.91 billion, up 11.4% year over year, and non-GAAP operating margin expanding to 32.1% from 30.7%. CEO Gary Dickerson bluntly raised the ceiling: “we now expect our semiconductor equipment business to grow more than 30% in calendar 2026.”

Shares reflect the move: AMAT closed at $602.50 on July 10, up 124.09% year to date. Forward P/E of 36 is not cheap, but with 28 Buy ratings against a single Strong Sell, the Street is not blinking. The next name goes narrower and hits harder on memory.

3. Lam Research: Etch, Deposition, and the HBM Stack Lam Research (NASDAQ:LRCX) owns the etch and deposition tools required to build 3D NAND and stack HBM DRAM dies without wrecking yield. Every incremental HBM3E and HBM4 layer means more Lam content per wafer. That is why the memory recovery narrative and the AI CapEx narrative converge on this ticker.

Q3 FY26 was a record quarter across the board: EPS of $1.47 beat by 7.83%, revenue hit $5.84 billion, up 23.76% year over year, and operating margin expanded to 35.0% from 33.9%. Q4 guidance calls for revenue of roughly $6.60 billion. CEO Tim Archer framed it plainly: “Lam delivered record revenue and EPS in the March quarter as AI-driven demand reshapes the semiconductor industry.”

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The stock closed at $350.33 on July 10, up 89.31% year to date and 246.66% over the last year. Analyst target is $357.77 with 29 of 35 analysts at a Buy or Strong Buy rating. Etch and deposition are the volume game. The next stock is the quality game, and it has monopoly economics.

4. KLA: The Process-Control Moat Nobody Can Bypass KLA Corporation (NASDAQ:KLAC) does one thing better than anyone: tell foundries where the defects are before a wafer becomes a $30,000 doorstop. There is no advanced node, no HBM stack and no CoWoS package being built at scale in 2026 without KLA inspection and metrology on the floor. That is the moat, and it prints margins that look like software.

Q3 FY26 revenue was $3.42 billion, up 11.5% year over year, with the Semi Process Control segment doing $3.08 billion. The kicker is profitability: TTM operating margin of 41.2% and return on equity of 95%. Capital return matched the confidence: a 17th consecutive dividend increase to $2.30 per share and a new $7 billion buyback authorization. CEO Rick Wallace called KLA “a key enabler of the AI ecosystem” across foundry/logic, memory, advanced packaging, and services.

KLAC closed at $231.52 on July 10, up nearly 82% year to date. Solid, though the real punchline is a $56 billion test company whose AI exposure just detonated.

5. Teradyne: The AI Test Kingpin Teradyne (NASDAQ:TER) tests the chips after everyone else builds them. Every accelerator, every HBM die, every networking ASIC gets validated on Teradyne automatic test equipment before it ships to a hyperscaler. Approximately 70% of Q1 revenue is tied to AI-related demand. There is no other name on this list with that level of direct AI concentration.

Q1 FY26 obliterated estimates. Revenue: $1.28 billion, up 87.04% year over year. Non-GAAP EPS: $2.56 versus $2.11 expected, a 21.15% beat. Non-GAAP operating margin expanded to 37.5% from 20.5% a year prior, and net income surged 303.36% to $398.9 million. CEO Greg Smith made the thesis explicit: “our results reflect the strength of our wafer to AI data center strategy.”

Shares closed at $359.60 on July 10, up 73.25% year to date and 264.63% over the past year. Analyst target is $423.41. Retail has noticed too: Reddit engagement spiked in mid-June with 263 upvotes and 73 comments in a single peak window on r/wallstreetbets. Robotics remains free optionality on top of the test franchise.

The Bottom Line Applied Materials raised its 2026 growth bar past 30%, KLA green-lit a $7 billion buyback, Lam printed a record quarter, Onto locked HBM into 2027, and Teradyne grew revenue 87%. That is a coordinated capex flood, well beyond a simple rotation, and the equipment vendors are the toll booths. China export controls and tariffs remain the tail risk on all five names, but with hyperscaler capex still climbing and every advanced node needing more process control per wafer, the window for reasonable entry is narrowing quarter by quarter.

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Key Takeaways KLA targets $1B in advanced packaging process control revenue in 2026, above prior expectations.Onto expects 30% revenue growth in 2026, aided by AI packaging and HBM demand.ONTO gained 27.3% in one month and trades at 39.61X forward earnings versus KLAC at 52.71X. The semiconductor industry is entering a major investment cycle, fueled by AI, advanced packaging, HBM and next-generation chip manufacturing. Among them, Onto Innovation, Inc. (ONTO - Free Report)  and KLA Corporation (KLAC - Free Report)  stand out as leaders in process control, inspection and metrology. KLA is the dominant industry player, while Onto Innovation is a fast-growing specialist focused on advanced packaging and semiconductor inspection technologies, making them a highly relevant comparison for investors.

Per a report from Fortune Business Insights, the global semiconductor metrology and inspection equipment market size is estimated to go from $15.84 billion in 2026 to $27.56 billion by 2034, at a CAGR of 7.2%. The semiconductor equipment market is growing as AI chips require increasingly precise manufacturing. Key demand drivers include advanced packaging, chiplet architectures, HBM, 2.5D/3D integration, automotive semiconductors and AI accelerator production. KLA benefits across leading-edge nodes, while ONTO is leveraged for advanced packaging investments.

Although both companies operate in similar markets, they differ significantly in size, product portfolio, customer exposure and growth prospects.  Investors seeking exposure to semiconductor equipment must decide whether they prefer the stability of an established industry giant like KLA or the higher-growth potential offered by Onto Innovation.

The Case for KLACKLA is the global leader in semiconductor process control, benefiting from advanced inspection and metrology technologies, strong customer relationships and high switching costs as chip manufacturing becomes increasingly complex. KLA continues to view AI as a major growth driver and a key contributor to its accelerating momentum. The company is experiencing stronger-than-expected traction in advanced packaging, prompting it to raise its outlook for advanced packaging-related semiconductor process control revenue from approximately $635 million in 2025 to around $1 billion in 2026, which is significantly above previous expectations.

Since 2021, KLA has expanded its process control market share by 360 basis points and now holds a position roughly seven times larger than its nearest competitor. It expects accelerating wafer fabrication equipment growth in 2026 and 2027, driven by increasing demand for process control across leading-edge logic, HBM, advanced packaging, faster product cycles and rising semiconductor design complexity. These trends are increasing the need for KLA’s solutions to improve R&D efficiency, support fab ramps and optimize manufacturing yields.

KLA’s increasingly advanced systems and longer tool lifecycles are strengthening its high-margin services business, creating a predictable long-term growth driver as customers demand greater tool performance and uptime. Reflecting this momentum, the company introduced a 2030 financial model targeting 13-17% revenue CAGR, raised its services growth outlook to 13-15%, increased its capital return target to more than 90% of free cash flow and announced its 17th consecutive dividend increase along with a new $7 billion share repurchase authorization. KLA expects to outpace the broader wafer equipment market through 2030, supported by the growing importance of process control across semiconductor manufacturing.

Image Source: Zacks Investment Research

Despite the positive outlook, investors should monitor several risks. Emerging technologies such as electron-beam inspection could alter competitive dynamics in process control, requiring KLA to increase R&D spending if competing solutions offer superior performance or cost efficiency. Additionally, elevated component costs, including DRAM used in system image-processing computers, are expected to pressure gross margins through at least 2026. While supply remains secure, unfavorable product mix shifts or additional tariffs could further weigh on profitability and operating leverage.

The Case for ONTORather than competing directly across KLA's entire product lineup, Onto Innovation focuses on niche markets experiencing rapid growth, especially those benefiting from AI chips and heterogeneous integration. Its smaller size allows it to grow faster when semiconductor capital spending accelerates. It has delivered strong revenue growth, driven by AI-related packaging demand, advanced inspection solutions, rising customer adoption, growing software revenue and expansion into specialty semiconductor markets. Its smaller revenue base also lets new customer wins generate an outsized percentage growth.

ONTO expects momentum to speed up in the second half of the year, supported by customer expansions, increasing adoption of new products and a growing backlog, leading to more than 15% sequential revenue growth and over 30% revenue growth in 2026. Demand is fueled by AI and high-performance computing applications, while the company's integrated optical process control and software solutions, strengthened through its strategic collaboration with Rigaku, enhance its value proposition for semiconductor manufacturers. As semiconductor manufacturers adopt more complex materials and 3D structures, management anticipates rising demand for hybrid metrology solutions that merge optical and X-ray technologies.

Image Source: Zacks Investment Research

Its Ai Diffract software, developed with Rigaku, has already secured two competitive wins and multiple customer evaluations, demonstrating its ability to address advanced process control challenges. The collaboration opens new revenue opportunities via software licensing and integrated metrology solutions, while Onto Innovation's 27% investment in Rigaku reinforces long-term alignment and access to next-generation X-ray technology. Combined, these capabilities position Onto Innovation to leverage growing demand in advanced packaging and cutting-edge semiconductor manufacturing.

Furthermore, ONTO’s Dragonfly platform is becoming a major growth driver, supported by a more than $240 million HBM-related volume purchase agreement through 2027 and expanding adoption across AI-driven advanced packaging applications. Recent customer qualifications, strong order momentum and growing demand for 3D inspection technologies are strengthening its position in high-bandwidth memory and advanced packaging markets, with the company expecting advanced packaging revenue to grow more than 50% in 2026.

Despite strong growth prospects, Onto Innovation faces risks from cyclical semiconductor spending, intense competition, customer concentration and geopolitical uncertainties in Asia. The company must continue innovating to maintain its market position, while ongoing supply chain constraints, particularly in precision optics, could adversely impact revenue growth and profitability.

Share Performance Trajectory for ONTO & KLACIn the past month, ONTO stock has surged 27.3% while KLAC has gained 37.5%.

Image Source: Zacks Investment Research

Valuation: Discount vs. PremiumValuation often determines future investment returns. In terms of forward price/earnings, ONTO shares are trading at 39.61X, lower than KLAC’s 52.71X.

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How the Zacks Consensus Estimate Compares for ONTO & KLACEarnings estimates for ONTO have moved up for both 2026 and 2027 over the past 60 days.

Image Source: Zacks Investment Research

For KLAC estimates have moved up for both 2026 and 2027 over the past 60 days as well.

Image Source: Zacks Investment Research

ONTO vs. KLAC: Which Stock is the Better Pick?Both ONTO and KLAC currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Both companies are well-positioned to benefit from the long-term expansion of semiconductor manufacturing, but they appeal to different types of investors. KLA is a strong choice for conservative investors, offering market leadership, solid profitability, recurring revenue and lower risk. Onto Innovation provides higher growth potential through its exposure to advanced packaging and AI semiconductor trends, but with greater volatility. Overall, KLA is better suited for stability and long-term consistency, while Onto Innovation appeals to investors seeking higher-risk, higher-reward opportunities.

Nonetheless, holding both stocks at present could provide balanced exposure to semiconductor industry growth, combining KLA’s stability with Onto Innovation’s higher growth potential.