10 Best Semiconductor Equipment Stocks to Buy Now

7. Onto Innovation Inc. (NYSE:ONTO)

Number of Hedge Fund Holders In Q3 2024: 34

Onto Innovation Inc. (NYSE:ONTO) is a semiconductor manufacturing equipment provider that sells lithography systems for defect inspection, packaging, and other use cases. Its product use cases mean that the firm is exposed to the performance of the broader semiconductor industry as opposed to specific sectors. Yet, the fact that Onto Innovation Inc. (NYSE:ONTO) plays a role in the packaging industry also means that the firm can benefit from tailwinds from AI-packaging demand. Packaging is a key bottleneck in the AI industry as we discussed in detail in the introduction of this piece. However, Onto Innovation Inc. (NYSE:ONTO)’s shares have seen turbulence recently as they fell by 11% after the firm’s third-quarter results. The drop came after the results beat analyst estimates by a hairline. Looking ahead, Onto Innovation Inc. (NYSE:ONTO)’s hypothesis depends on the successful execution of its JetStrap lithography system and the chip sector’s broader recovery.

Artisan Partners mentioned Onto Innovation Inc. (NYSE:ONTO) in its third-quarter investor letter. Here is what the fund said:

“Notable adds in the quarter included Samsara, Illumina and Onto Innovation Inc. (NYSE:ONTO). Onto Innovation provides process control solutions and inspection systems needed for advanced semiconductor packaging inspection and optical metrology. Wafer-level packaging inspection has been a small yet rapidly growing segment within process control tied to increasing chipset sales from AI, edge computing and wearable technology advancements. Optical metrology growth has been driven by a transition to 3D chip architecture, which requires greater numbers of sensitive layers to be measured and tracked. This growth has been further supported by gross margin and operating margin expansion, as increasing complexity drives pricing power. Shares declined in the quarter, and we used it as an opportunity to build our position.”