MW These 2 chip stocks could be cheaper ways to invest in a hot AI trend

By Britney Nguyen

Shares of Veeco and Axcelis have lagged their larger semiconductor-equipment peers, making them potentially compelling opportunities for investors

Semiconductor-equipment makers have seen their shares climb in recent months as chip makers look to address supply shortages.

Shares of chip-equipment makers have been hot in recent months, with the companies seen as somewhat agnostic plays on the booming budgets being allocated to artificial-intelligence buildouts.

In the process, some of the most high-profile semiconductor-equipment stocks have gotten quite expensive. But investors who still want to get in on this theme at more reasonable valuation levels might consider shares of two smaller players whose multiples aren't yet so frothy.

First, it's worth zooming out at the broader backdrop. Mizuho trading-desk analyst Jordan Klein notes that "a lot of money is rotating into semicaps," as the makers of semiconductor capital equipment are known, as investors figure these companies are prime beneficiaries of increased capital spending that could sustain for years.

Shares of Lam Research $(LRCX)$ and KLA $(KLAC)$ are up 64.7% and 35.6%, respectively, in the past six months, while shares of Applied Materials (AMAT) are up 65.3%. Some smaller stocks have fared even better, with Teradyne $(TER)$ and Advanced Energy Industries $(AEIS)$ up 118.5% and 86.7%, respectively, in the same period.

Klein likes chip-equipment stocks because they offer a multiyear growth opportunity, rather than a "one-and-done setup." And he notes that shares of Veeco Instruments $(VECO)$ and Axcelis Technologies $(ACLS)$ "have materially lagged" their larger rivals in the past six months, making them especially intriguing plays now. Veeco's stock is up 18.1% in the past six months, while Axcelis shares are down 0.1%.

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When looking at expected earnings for the next 12 months, Veeco trades at a multiple of 20.2, while Axcelis trades at 25.6, according to Dow Jones Market Data. By contrast, Teradyne's stock trades at 43.1 times forward earnings, KLA's stock trades at a 32.3 multiple, Lam's stock trades at a 32 multiple and Applied Materials' stock trades at 27.8.

Investors are likely concerned about a pending merger between Veeco and Axcelis that is expected to close in the second half of this year, Klein said. The companies are also more exposed to end markets such as legacy node and silicon-carbide chips that are seeing a slowdown in demand, he added.

But Veeco could be a "compelling" long-term play due to the tools the company offers, according to Klein. Veeco sells technologies for ion-beam deposition and laser annealing, which are essential in manufacturing semiconductors and packaging advanced chips.

The company "has tool exposure to some of the highest-growth end markets right now," Klein noted, pointing to hard-disk drives and high-bandwidth memory. Meanwhile, its "growth and bookings are accelerating."

Veeco's expansion into HBM comes as the world's top three memory-chip makers are starting to address a severe supply-and-demand imbalance that is expected to continue for at least the next few years.

SK Hynix (KR:000660), Samsung Electronics (KR:005930) and Micron Technology $(MU)$ have benefitted in recent months from supply shortages driven by AI demand. The tightness has allowed them to raise prices, while the cyclical nature of the memory market has made them reluctant to add more capacity out of fear that demand will slow down. Now, the companies have announced plans to expand manufacturing for dynamic random-access memory and NAND.

As new fabrication facilities are built or retrofitted in the next few years, more chip-making tools and equipment will be needed, Klein said. Layer on the fact that AI-chip designs are becoming more complex, and that's "added demand for a lot of new tools" for processes such as inspection and packaging, he noted.

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Axcelis CEO Russell Low talked up the company's opportunity in DRAM alongside its earnings, saying that he expects momentum there to sustain throughout the year "as customers expand capacity to address growing demand for AI-related applications." The company designs and manufactures ion implantation equipment that is critical in creating transistors on chips.

However, William Blair analyst Jed Dorsheimer wrote in a recent note that Axcelis has less of a dominant position in the memory space than in its other end markets, as it holds the second-largest share of the market behind Applied Materials. That means lower margins and average selling prices, he added.

Still, Dorsheimer said the impending merger with Veeco "will complement Axcelis's singular focus on ion implant and cast a wider net to cover semiconductor capital equipment."

For now, the merger between Veeco and Axcelis is awaiting approval from China's State Administration for Market Regulation.

-Britney Nguyen

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March 28, 2026 09:00 ET (13:00 GMT)

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