KLA Sees Bright Future Amid Market Share Gains

MENLO PARK, Calif. — KLA Corporation is poised for significant market share gains in the semiconductor equipment sector, according to a recent report from Morgan Stanley. Analyst Shane Brett upgraded KLA’s stock from ‘equal weight’ to ‘overweight’ and raised his price target by $122 to $870, suggesting a potential upside of 29.2% for investors.

Brett highlighted KLA’s dominant position in the process control market within the wafer fabrication equipment (WFE) industry. This market involves machinery that inspects semiconductor wafers, crucial for ensuring product quality. He anticipates that KLA will outperform industry forecasts driven by both structural and unique factors over the next few years. ‘We expect KLA to outgrow WFE in 2025-2026 and see a rich catalyst path for a re-rating,’ Brett stated, projecting revenue growth of 8% and 12% for the company in those years respectively.

According to Brett, two key catalysts will support KLA’s revenue growth: increased process control intensity and market share expansion. He emphasized that KLA’s market share in process control will likely rise as the industry transitions toward larger die sizes and an increase in design starts, which is expected to raise the percentage of non-functional or low-quality chips.

Larger die sizes refer to the integration of larger circuits on a single chip, which can enhance performance but may also lead to more defects. Brett noted KLA’s performance is already reflecting this trend, particularly in alignment with capital expenditures from Taiwan Semiconductor Manufacturing Company (TSMC). ‘KLA’s share of TSMC capex and memory share has increased, and we expect it to continue to grow,’ said Brett.

Moreover, he added that KLA’s ability to capitalize on market inflections, along with its technological edge and data processing capabilities, strengthens its competitive advantage, effectively deepening its market position.

KLA shares have risen 6.9% this year, outperforming the broader market. However, over the past year, the stock is down more than 2%.