Onto Innovation Inc. (ONTO): A Bull Case Theory

We came across a bullish thesis on Onto Innovation Inc. on Valueinvestorsclub.com by anonymous.user. In this article, we will summarize the bulls’ thesis on ONTO. Onto Innovation Inc.'s share was trading at $213.70 as of January 28th. ONTO’s trailing and forward P/E were 58.72 and 32.47 respectively according to Yahoo Finance.

Onto Innovation (ONTO) represents a highly compelling investment opportunity with potential 80–100%+ upside over the next 1–2 years, driven by a convergence of secular AI demand, cyclical semiconductor inflection, and operational execution. ONTO produces advanced semiconductor capital equipment, including large metrology and inspection tools critical to chip production, particularly in the back-end advanced packaging stage.

The company is on the verge of shipping and qualifying its flagship Dragonfly 5 system for TSMC, which is expected to restore ONTO’s share lost to KLA during the NVDA Blackwell ramp, capture 25–100% of displaced volume starting in mid-2026, and drive significant gross margin expansion. This milestone, combined with positive consensus revisions and the strong 4Q backlog, positions ONTO to beat estimates and reclaim its AI-beneficiary multiple, potentially delivering 40–50% stock upside.

Further upside is supported by a supply-constrained semiconductor environment where AI-driven demand for high bandwidth memory and advanced packaging is projected to more than double, creating a supercycle that directly benefits ONTO.

The planned Semilab acquisition adds $130 million in annualized revenue, is immediately EPS and margin accretive, and strengthens ONTO’s capabilities in materials characterization and wafer contamination monitoring, contributing an additional 10%+ EPS upside. ONTO is insulated from China-related risks and trades at a trough multiple while peers are at peak, creating a favorable rotation opportunity.

Additional catalysts include memory demand acceleration, potential front-end share gains, and continued AI-related spending in the semiconductor ecosystem, which could further lift EPS and valuations. With execution on the new machine, Semilab integration, and AI-driven tailwinds, ONTO is positioned for multi-year revenue and EPS growth, with 2027 EPS of $9–$10 implying 90%+ upside at normalized 30x multiple, highlighting a rare asymmetric risk/reward profile.

Previously, we covered a bullish thesis on KLA Corporation (KLAC) by Quality Equities in January 2025, which highlighted the company’s leadership in semiconductor process control, AI-driven demand, and TSMC’s elevated capital expenditures. KLAC’s stock price has appreciated by approximately 114.82% since our coverage due to strong industry tailwinds. Anonymous.user shares a similar thesis but emphasizes Onto Innovation’s (ONTO) potential to regain TSMC share, benefit from back-end advanced packaging, and realize upside from the Semilab acquisition.

Onto Innovation Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 57 hedge fund portfolios held ONTO at the end of the third quarter which was 37 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.

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Disclosure: None.