Is ONTO a good stock to buy? We came across a bullish thesis on Onto Innovation Inc. on Uncle Stock Notes’s Substack. In this article, we will summarize the bulls’ thesis on ONTO. Onto Innovation Inc.’s share was trading at $351.36 as of July 1st. ONTO’s trailing and forward P/E were 163.42 and 49.0 respectively according to Yahoo Finance.
Photo by JESHOOTS.COM on Unsplash
Onto Innovation Inc. engages in the design, development, manufacture, and support of process control tools that perform macro-defect inspection and metrology in the United States and internationally. ONTO is positioned as a critical semiconductor equipment beneficiary of the AI infrastructure buildout, operating at the intersection of advanced packaging, high-bandwidth memory (HBM), and next-generation Gate-All-Around (GAA) process technologies.
Read More: 15 AI Stocks That Are Quietly Making Investors Rich
Read More: Undervalued AI Stock Poised For Massive Gains: 10000% Upside Potential
The company delivered a strong Q1 with revenue of approximately $292 million, beating expectations and growing nearly 10% year over year, driven not by cyclical recovery but by structural demand from AI-driven CoWoS packaging and HBM capacity expansion. Adjusted EPS of $1.42 also exceeded estimates, while non-GAAP gross margins expanded to 55.7% with Q2 guidance reaching 56%–56.5%, signaling strong pricing power and the emergence of its Dragonfly G5 and Atlas G6 platforms as mission-critical tools in advanced manufacturing.
Onto’s Dragonfly G5 has become deeply embedded in 2.5D and HBM packaging inspection, where defect detection directly determines yield in multi-layer GPU and memory stacks used by NVIDIA, SK Hynix, and TSMC ecosystems. Meanwhile, Atlas G6 is gaining traction in GAA architectures, marking Onto’s entry into sub-2nm manufacturing metrology and positioning it for the next major semiconductor node transition. Advanced node revenue is expected to grow roughly 25% annually, reinforcing its exposure to multi-year AI capacity expansion rather than short-cycle electronics demand.
A key strategic catalyst is the $710 million investment in Rigaku, securing a 27% stake to integrate X-ray metrology with Onto’s optical systems, creating a hybrid inspection platform that addresses both speed and deep-layer accuracy in 3D structures. This positions Onto to dominate the full metrology stack in AI chip manufacturing.
Management guidance implies Q2 revenue of $320–$330 million and EPS momentum supporting a 2026 estimate of $6.80–$7.20. On this basis, the stock trades at roughly 40x–42x forward earnings, with DCF scenarios suggesting upside to $295–$310 in the base case and over $350 in an optimistic outcome, implying meaningful re-rating potential as AI-driven yield bottlenecks intensify.
Previously, we covered bullish thesis on KLA Corporation (KLAC) by Quality Equities in January 2025, highlighting leadership in process control and AI-driven capex tailwinds. KLAC stock has appreciated by approximately 289.67% (adjusted for stock split) since our coverage. Uncle Stock Notes shares a similar view but emphasizes Onto Innovation exposure to advanced packaging, HBM, and GAA metrology and Rigaku integration.
Onto Innovation Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 67 hedge fund portfolios held ONTO at the end of the first quarter which was 46 in the previous quarter. While we acknowledge the risk and potential of ONTO 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 ONTO and that has 10,000% upside potential, check out our report about this cheapest AI stock.
Disclosure: None.
