When it comes to the manufacturing of advanced semiconductors used in artificial intelligence (AI) systems, there is a little-known segment of the industry that acts as the gatekeeper: metrology equipment. Chief among metrology equipment providers is KLA Corp. , whose stock is sporting an incredible nearly 75% gain in the last one-year stretch.
But a smaller peer, Onto Innovation ( ONTO -2.43% ) , is up nearly 105%. Why? And is it still a buy? A key to making more advanced chips Metrology (the science of measurements) and process diagnostics and control (PDC, basically quality control on a manufacturing process) is a critical stage after a chip is designed.
Early in the chipmaking process, metrology and PDC equipment ensure the new chip functions correctly and is free of defects that impact performance. Companies like Taiwan Semiconductor Manufacturing and Intel rely heavily on metrology and PDC equipment when developing new and more advanced manufacturing processes. Thus, think of metrology equipment as a type of final step in building AI systems , a type of gatekeeper to unlocking more powerful computing.
While KLA Corp. has received attention over the years as a fantastic dividend growth investment , Onto Innovation is a little-known competitor. It's the product of a 2019 merger between two small metrology companies, a move that helped the business scale up its operations to attain greater efficiency (higher profit), which in turn has helped it invest in and unveil new met.
