Why KLA Stock Triumphed on Thursday

Key Points

• It was quite a banner day for chip stocks.

• One monster company in the sector announced a major investment in another.

• 10 stocks we like better than KLA ›

Given how KLA (NASDAQ: KLAC) stock performed on the market Thursday, the company probably doesn't want the trading week to end. Its shares zoomed nearly 6% higher in price, thanks largely to a promising new deal in the chip industry. That rise was notably steeper than the S&P 500 index's 0.7% increase.

A very big deal in the sector

Even by the standards of the microchip business, the deal announced between Nvidia and Intel is significant. The former is investing a cool $5 billion in the latter, and the two will collaborate on a series of products and projects.

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Image source: Getty Images.

That payout will breathe more life into the struggling Intel. Last month, the Trump administration announced that the federal government would invest $8.9 billion into the company for a nearly 10% equity stake. A key goal of that move was to bolster the domestic chipmaking sector.

Just before that, news hit the headlines of another investment, this one from SoftBank. The busy Asian tech conglomerate said it was plowing $2 billion into Intel.

This fairly sudden infusion of capital into one of America's major processor powerhouses is a tide that promises to lift many boats -- hence the investor enthusiasm Thursday for all manner of chip stocks. KLA is a fine candidate, as it's a pick-and-shovel company that manufactures the equipment used to produce chips.

Knock-on effect

I should note here that KLA was not directly involved in any of the above transactions. Further, there's no guarantee that its business will jump due to Intel's influx of capital. As an important link in the chip production chain, however, if any company's going to benefit from a knock-on effect with these deals, it's KLA.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel and Nvidia. The Motley Fool recommends the following options: short November 2025 $21 puts on Intel. The Motley Fool has a disclosure policy.