These 3 Stocks Play In Fast-Growing Areas Of Semiconductor Equipment

On Friday, a Wall Street brokerage began to cover three stocks in two of semiconductor equipment's fastest-growing segments. Jefferies has given buy ratings to Onto Innovation (ONTO), Nova NVMI and Camtek CAMT.

Vedvati Shrotre, an analyst at Jefferies, sees bright futures for the trio. She cites a strong demand for their products due to increasing chip complexity.

Shrotre wrote in a client note that the three companies are active in fast-growing markets such as wafer-level inspection of packaging and optical metrology. Metrology is a scientific study of measurements.

Camtek and Onto Innovation both play in wafer-level inspection where the growth is being driven by increasing complexity of semiconductor packages. Nova and Onto Innovation are involved in optical metrology where the growth is being driven by 3D transistors and chip architectures.

According to her price targets, the three stocks could have a potential upside of 20-40%. Shrotre has set price targets of 35 for Camtek, 115 for Nova and 100 dollars on Onto Innovation.

Today, Camtek closed at 26.01 while Nova rose 0.8% to reach 93.37. Onto Innovation's stock rose 1.3% to 82.71.

Chipmakers are using techniques such as stacking and chiplets to keep up with Moore's Law. Shrotre stated that this is a benefit to Camtek and Onto Innovation.

As chip structures have grown vertically, semiconductors are becoming more complex. This trend is also applicable to 3D Nand memory chips, 3D DRAM and other architectures such as gate-all around transistors.

Shrotre explained that as the complexity of devices increased, so did the number of steps in etching and deposition, resulting in a greater need for additional steps of metrology.

She said that the use of more materials in transistors by chipmakers is increasing, and this will increase the demand for metrology equipment.

Shrotre stated that metrology trends were catalysts for Nova, Onto Innovation and Nova. Camtek, Nova, and Onto Innovation are all on the IBD Tech Leaders List.

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