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 $1,929.20 as of June 5th. KLAC’s trailing and forward P/E were 54.64 and 38.02 respectively according to Yahoo Finance.
KLA Corporation, together with its subsidiaries, designs, manufactures, and markets process control, process-enabling, and yield management solutions for the semiconductor and related electronics industries worldwide. KLAC delivered a near flawless Q3 FY26 earnings report that reinforced its positioning as a central beneficiary of semiconductor complexity and AI-driven manufacturing intensity.
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The company beat on revenue, earnings, and gross margins while management issued unusually strong forward commentary, including early visibility into 2027 growth and a near doubling of advanced packaging expectations, yet the stock still declined over 5 percent as investors questioned near-term earnings conversion.
The complexity tax thesis strengthened, with KLA expanding its moat through 58 percent process control share, accelerating services growth, and rising demand from advanced packaging, HBM stacking, and AI-driven foundry complexity increasing inspection intensity per wafer. However, relative growth lag versus peers such as Lam Research, which grew 24 percent versus KLA’s 11 percent, highlighted sequencing risk in the AI fab cycle where deposition and etch tools lead before inspection demand fully inflects.
Margin dynamics added caution as non-GAAP gross margin of 62.2 percent guided slightly lower to 61.75 percent due to DRAM input costs, tariffs, and mix effects, limiting near-term expansion despite strong demand visibility. The stock’s valuation near 37 times forward earnings reflects optimism priced in, leaving fair value around $1,780 unless growth reaccelerates as the second phase of AI infrastructure shifts from capacity buildout to yield optimization.
Despite short-term volatility, the structural bull case remains intact as complexity compounds KLA’s role as the “tax collector” of semiconductor manufacturing, with advanced packaging growth, services expansion, and eventual memory cycle normalization driving a medium-term rerating.
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 tools. KLAC’s stock price has appreciated by approximately 154.68% since our coverage. Nikhs shares a similar view but emphasizes earnings conversion, margin pressure, and sequencing risk in the AI fab cycle.
KLA Corporation is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 71 hedge fund portfolios held KLAC at the end of the first quarter which was 67 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.
