Core Insights - The semiconductor industry is experiencing growth driven by the artificial intelligence (AI) boom, leading to a comparison between Applied Materials (AMAT) and Onto Innovation (ONTO) as potential investment picks [2] Group 1: Company Overview - Applied Materials (AMAT) is a major manufacturer of semiconductor fabrication equipment, providing solutions for deposition, etching, inspection, and metrology [3] - Onto Innovation (ONTO) specializes in metrology and inspection solutions, including automated metrology systems and advanced packaging services [10] Group 2: Financial Performance - AMAT's revenues from advanced semiconductor nodes exceeded $2.5 billion in fiscal 2024, with expectations to double in fiscal 2025 [7] - The Zacks Consensus Estimate for AMAT's fiscal 2025 revenues is $28.8 billion, reflecting a year-over-year growth of 6% [7] - ONTO's fiscal 2025 revenues are estimated at $992.6 million, indicating a modest year-over-year growth of 0.53% [13] Group 3: Growth Prospects - AMAT's integration of AI-based image recognition in its inspection solutions is expected to enhance the analysis of nanoscale defects in advanced chips [5] - ONTO's 3Di bump metrology solution is gaining traction due to the demand for complex AI chip packages, although it faces competition in the 2.5D AI packaging market [12] Group 4: Market Challenges - AMAT is positioned for continued growth in fiscal 2025, while ONTO is experiencing tool slot losses in AI packaging and revenue challenges due to US-China tensions [11] - ONTO's reliance on the Chinese market, which contributed 10% of its total revenues in fiscal 2024, raises concerns amid ongoing geopolitical tensions [13] Group 5: Valuation and Stock Performance - In the past three months, AMAT shares gained 5.8%, while ONTO shares declined by 29.4% [15] - Both companies are trading below the sector average in terms of forward price-to-sales multiples, with AMAT at 4.36X and ONTO at 4.57X, indicating AMAT is relatively cheaper [17] Group 6: Investment Outlook - AMAT is viewed as having a stronger growth profile and solid fundamentals, making it a more attractive investment compared to ONTO, which has weaker growth projections [18] - AMAT holds a Zacks Rank 3 (Hold), while ONTO has a Zacks Rank 5 (Strong Sell), indicating a clear advantage for AMAT in the current market [19]