20 Worst Performing AI Stocks of Last Week

11. KLA Corporation (NASDAQ:KLAC)

Weekly Decline: 13.26%

Number of Hedge Fund Holders: 55

KLA Corporation (NASDAQ:KLAC) is a semiconductor materials and equipment company. It designs and manufactures process control, process-enabling, and yield management solutions.

Many investors may be considering KLA Corporation (NASDAQ:KLAC) to be a good AI stock, especially in light of its September dividend yield increase of 17%. The company is also definitely a leader in process control and metrology equipment, which is used to inspect chips for defects during the semiconductor manufacturing process. Seeing as KLA Corporation (NASDAQ:KLAC) occupies a dominant position in this very unique niche, many investors seem to be flocking to this stock.

However, the recent declines seen in KLA Corporation’s (NASDAQ:KLAC) stock price may serve as a warning for new investors. This decline may be attributed at least partially to the fact that KLA Corporation (NASDAQ:KLAC), while definitely a strong AI player, doesn’t really seem to be overwhelmingly better than its competitors, such as Lam Research and Applied Materials. These competitors typically tend to trade at lower multiples than KLA Corporation (NASDAQ:KLAC), and both of them have also raised their dividends recently.

KLA Corporation (NASDAQ:KLAC) also seems to be more constrained in how much it can grow its payout, primarily because it’s held back by its overall valuation, current payout ratio, and leverage on the balance sheet – KLA Corporation (NASDAQ:KLAC) has $2.13 billion in net debt as of this September. Hence, the fact that KLA Corporation (NASDAQ:KLAC) seems to be more constrained than its competitors – both of which have hefty net cash positions, has resulted in many investors shying away from KLA Corporation (NASDAQ:KLAC).

There were 55 hedge funds long KLA Corporation (NASDAQ:KLAC) in the second quarter, with a total stake value of $2.3 billion.

Parnassus Investments mentioned KLA Corporation (NASDAQ:KLAC) in its second-quarter 2024 investor letter:

“KLA Corporation (NASDAQ:KLAC), a provider of process control and yield management solutions for the semiconductor and related nanoelectronics industries, continued its strong run. We expect KLA will continue to benefit from the increasing complexity of chip designs.”