On Friday, Evercore ISI updated its financial outlook for Onto Innovation Inc. (NYSE: NYSE:ONTO), increasing the price target to $250 from the previous $235, while maintaining an Outperform rating for the company's stock. The firm foresees a positive trajectory for Onto Innovation, driven by the growing demand for advanced packaging due to the rise of artificial intelligence (AI) chips.
The semiconductor industry is experiencing a shift as AI chips push die sizes beyond the reticle limit, which is traditionally 850 square millimeters. This change is leading chipmakers to adopt chiplet and 2.5D/3D packaging techniques. These innovative architectures rely on intricate interconnects, such as bumps and through-silicon vias, which in turn increase the complexity of semiconductor packages.
Evercore ISI highlights that the number of processors utilizing chiplet architecture is expected to grow tenfold by 2025. This significant increase is anticipated to boost the demand for package inspection and metrology tools, essential for ensuring the quality and reliability of advanced semiconductor packages.
Onto Innovation, with approximately 40% of its revenues stemming from packaging, is well-positioned to capitalize on this industry trend. The company's expertise and offerings in the area of packaging inspection and metrology tools are likely to see increased demand as the market for AI chips and advanced packaging continues to expand.
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