KLA Benefits From Growing AI Infrastructure Demand: What's Ahead?

Core Insights - KLA Corporation (KLAC) is experiencing growth driven by increasing demand for AI infrastructure, particularly in process control and wafer fab equipment (WFE) markets, including high-bandwidth memory (HBM) and advanced packaging [1] Group 1: Advanced Packaging and WFE Growth - KLA's advanced packaging portfolio is projected to generate over $925 million in revenue for calendar year 2025, reflecting a 70% year-over-year increase [2] - The advanced packaging market, currently valued at $11 billion, is growing faster than the core WFE market, presenting a significant growth opportunity for KLA [3] - KLA anticipates mid- to high single-digit growth in WFE for calendar year 2025, driven by investments in leading-edge foundry/logic and memory to meet AI and premium mobile demand [4] Group 2: Competitive Landscape - KLA faces strong competition from Teradyne and Applied Materials, both of which are expanding their presence in the AI infrastructure market [6] - Teradyne expects AI-related demand to be a key growth driver, with projected revenues between $920 million and $1 billion for the fourth quarter of 2025 [7] - Applied Materials is leading innovations in AI-driven semiconductor technologies, which are expected to enhance the WFE market and drive long-term revenue growth [8] Group 3: Stock Performance and Valuation - KLA's stock has increased by 67.1% over the past six months, outperforming the Zacks Computer & Technology sector and the Zacks Electronics - Miscellaneous Products [9] - The stock is currently trading at a forward 12-month Price/Sales ratio of 14.38X, significantly higher than the industry average of 6.98X, indicating a premium valuation [12] - The Zacks Consensus Estimate for fiscal 2026 earnings is $35.69 per share, suggesting a year-over-year growth of 7.24% [15]