Two Chip-Equipment Stocks Just Crushed Nvidia. Is the AI Rally Broadening?

Two Chip-Equipment Stocks Just Crushed Nvidia. Is the AI Rally Broadening?

Sat, September 5, 2026 at 9:43 PM GMT+3 3 min read

KLA gained 7.3% and Lam Research rose 5.1% on September 4, comfortably ahead of Nvidia's 0.8% move. The stocks do not sell accelerators. They sell the process-control and fabrication equipment required to produce more advanced logic, memory, and packaging capacity. KLA Corporation (NASDAQ:KLAC) and Lam Research Corporation (NASDAQ:LRCX) therefore test whether investors are shifting from the visible AI winner to the factories behind it.

KLA's fiscal fourth-quarter revenue reached $3.66 billion, and management said AI infrastructure is creating advanced-packaging opportunities for its process-control portfolio. The bull case is rising inspection intensity. Smaller geometries, chiplets, and complex packages create more opportunities for costly defects, increasing the value of metrology. The bear case is semiconductor-capital-equipment cyclicality, export controls, and the possibility that customers pause spending after a heavy buildout.

The inner workings of a semiconductor manufacturing facility, neon hued machines humming with activity.

Insider Monkey counted 81 hedge funds holding KLA Corporation (NASDAQ:KLAC) at June 30, up from 71 at March 31. Peter Rathjens, Bruce Clarke, and John Campbell's Arrowstreet Capital disclosed 4,712,396 shares. That was roughly 40% below its split-adjusted Q1 position, so the falling individual stake tempers the rising aggregate holder count.

Lam's June-quarter revenue was $6.72 billion, with a 51.7% gross margin and 37.4% operating margin. Management tied record performance to AI-driven semiconductor demand. Lam benefits when customers add deposition and etch steps to manufacture denser memory and logic. Its bear case is similar to KLA's, but with more direct exposure to wafer-fabrication spending and memory-capacity timing.

Hedge-fund participation in Lam Research Corporation (NASDAQ:LRCX) rose to 139 funds in Q2 from 123 in Q1. Arrowstreet Capital, the largest holder shown on Insider Monkey's Q2 table, reported 12,269,198 shares, about 7% fewer than in Q1. Both quarter-end holdings snapshots predated the September 4 rally, so they cannot show how funds reacted to it.

Lam's latest published short-interest settlement, August 14, recorded 28,419,138 shares sold short and 3.27 days to cover. That is not a crowded bearish position. One plausible read of the rally is that investors were rotating toward the manufacturing capacity behind AI, but no company-specific catalyst was confirmed. KLA offers the inspection tollbooth; Lam offers greater exposure to the number and complexity of process steps. Both need continued customer capital spending, and neither is immune if AI deployment stops justifying new fabs and advanced-packaging lines. Investors should separate utilization-driven service revenue from new-system demand, because recurring installed-base economics can cushion a downturn but cannot fully replace a capital cycle. Friday broadened the market's attention; it did not abolish semiconductor cyclicality. Order growth across leading-edge logic, memory, and packaging will show whether this broadening has operating depth beyond a single optimistic session.

While we acknowledge the potential of KLAC and LRCX as investments, we believe certain other AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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