AMAT vs. KLAC: Which Stock Has an Edge in Semiconductor Equipment Space?

Applied Materials AMAT and KLA Corporation KLAC are two big names in the semiconductor equipment market, serving different stages of the chip manufacturing process. While Applied Materials develops equipment for deposition, etching, and inspection across a wide range of semiconductor nodes, KLAC specializes in process control and metrology systems.

With the boom of artificial intelligence (AI), the semiconductor industry is experiencing massive growth. However, the question remains: Which stock is a better investment pick now? Let’s break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.

The Case for Applied Materials

Applied Materials is experiencing strong traction in its Sym3 Magnum etch system, Cold Field Emission eBeam technology, gate-all-around, backside power delivery, and 3D DRAM technology nodes crucial for developing high-performance processing and memory chips used for AI and HPC workloads.

AMAT reported its etching business, which surpassed $1 billion of quarterly revenues for the first time in the third quarter of 2025. Earlier, it had reported that its Sym3 Magnum etch system has generated more than $1.2 billion in revenues since its launch in February 2024.

However, Applied Materials is grappling with the trade restrictions imposed by the U.S. government on its semiconductor equipment sales to China. AMAT’s revenues from the 200mm equipment sales have been hampered by the U.S. government’s recent stance toward China. The company is also facing restrictions in servicing some Chinese clients, resulting in an overall decline in Applied Global Services’ revenues.

AMAT’s weakness in the Chinese market has been further exacerbated by the inflow of newer players like Scaria, which has begun providing products that overlap with Applied Materials. A cyclical slowdown in AMAT’s IoT, Communications, Automotive, Power, and Sensors segment has also stagnated the overall performance.

The Zacks Consensus Estimate for fiscal 2025 signals single-digit growth in both bottom and top lines. The consensus mark for revenues and EPS indicates year-over-year growth of 1.2% and 8.3%, respectively.

The Case for KLA Corporation

The rising demand for AI chips is also ramping up the demand for advanced process control and process-enabling solutions provided by KLA Corporation. KLAC’s advanced packaging solutions are also experiencing robust traction on the back of AI and high performance computing.

KLAC’s advanced packaging business has become a major growth driver, fueled by the AI boom and rising demand for high-performance computing and high-bandwidth memory. In 2025, KLA Corporation expects revenues from advanced packaging systems to exceed $925 million, nearly doubling from last year and up from a prior forecast of $850 million, reflecting surging demand for process control in complex 2.5D and 3.5D architectures such as CoWoS used in AI GPUs and XPUs.

KLAC’s inspection and metrology tools are essential for detecting defects and optimizing yields in these high-value, multi-die packages, where inspection rates approach 100%. The company has grown its process control intensity in packaging from about 1% in 2022 to roughly 5-6% today, capturing share as customers adopt its portfolio to meet tighter design and reliability demands.

The Zacks Consensus Estimate for fiscal 2025 signals single-digit growth in both bottom and top lines. The consensus mark for fiscal 2026 revenues and EPS indicates year-over-year growth of 5.3% and 3.8%, respectively.

Stock Price Performance and Valuation of AMAT and KLAC

Year to date, shares of Applied Materials and KLA Corporation have gained 80.9% and 37.7%, respectively.

Both AMAT and KLAC are trading at forward 12-month price-to-sales multiples of 11.4X and 6.12X, above their one-year median of 8.20X and 4.75X, respectively, over the past year.

Conclusion: KLAC vs. AMAT

Both AMAT and KLAC are essential players in the semiconductor equipment space, but KLA Corporation has the advantage of possessing a stronger market share in its specialized domain. While KLAC carries a Zacks Rank #2 (Buy), AMAT has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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