Is KLAC a good stock to buy? We came across a bullish thesis on KLA Corporation on Nikhs’s Substack. In this article, we will summarize the bulls’ thesis on KLAC. KLA Corporation’s share was trading at $1,812.06 as of April 22nd. KLAC’s trailing and forward P/E were 52.75 and 36.76 respectively according to Yahoo Finance.
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KLA Corporation (KLAC) is positioned as a critical enabler of semiconductor manufacturing, operating as a “tollbooth” on rising chip complexity rather than a traditional equipment provider. The company focuses on process control—inspection and metrology systems that detect defects early in production—serving leading chipmakers including TSMC, Samsung, Intel, SK Hynix, and Micron.
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This role creates powerful economics, as preventing defects on increasingly expensive wafers delivers outsized value, supporting industry-leading margins of over 60% gross and 40% operating. As semiconductor manufacturing transitions to advanced nodes such as 2-nanometer, adopts high-bandwidth memory, and scales advanced packaging, process complexity is accelerating, structurally increasing demand for KLA’s solutions and expanding its share of wafer fab equipment spending.
Beyond core tools, KLA’s business model is strengthening through high-margin recurring services, which have grown consistently for over a decade and are expected to approach a quarter of revenue by 2030, enhancing durability across cycles. Simultaneously, advanced packaging is emerging as a second growth engine, with revenue rapidly scaling as chiplet architectures and AI-driven designs require front-end precision in back-end processes. KLA’s installed base of over 57,000 tools and decades of proprietary defect data further reinforce a powerful competitive moat, driving switching costs and continuous improvement through machine learning.
While the company trades at a premium valuation, its structurally improving business quality, expanding addressable market, and exposure to a multi-year AI-driven semiconductor cycle position it for sustained growth. With multiple catalysts including rising process control intensity, services expansion, and packaging adoption, KLA represents a high-quality compounder with long-term upside potential.
Previously, we covered a bullish thesis on KLA Corporation (KLAC) by Quality Equities in January 2025, which highlighted AI-driven semiconductor demand, rising TSMC capex, and KLA’s leadership in process control and inspection tools. KLAC’s stock price has appreciated by approximately 139.22% since our coverage. Nikhs shares a similar view but emphasizes on KLA’s structural moat, services-led recurring revenue, and compounding gains from rising semiconductor complexity across advanced nodes, HBM, and packaging.
KLA Corporation is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 67 hedge fund portfolios held KLAC at the end of the fourth quarter which was 61 in the previous quarter. While we acknowledge the risk and potential of KLAC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KLAC and that has 10,000% upside potential, check out our report about this cheapest AI stock.
Disclosure: None.
