KLA (KLAC) Could Be 24% Undervalued On AI Demand And Backlog Growth

KLA (KLAC) is back in focus as multiple reports flag strong demand for its process-control equipment tied to AI infrastructure, advanced chip technologies, and data centers, along with a larger market outlook and sizable order backlog.

Recent trading in KLA has been choppy, with the share price jumping 4.74% in the last session to US$176.99 after sector strength in AI linked chipmakers. However, the 30 day and 90 day share price returns are down 3.80% and 34.24% respectively, while the year to date share price return of 38.87% and 1 year total shareholder return of 70.31% suggest longer term momentum remains intact.

Capture the AI equipment theme playing out at KLA, and benchmark it against other potential breakouts across 88 AI infrastructure stocks.

Bulls point to KLA's AI driven backlog and profit base, while bears flag the sharp 90 day pullback and China risk. Which side does the current valuation actually support as an AI infrastructure play?

Most Popular Narrative: 24% Undervalued

KLA's most followed valuation story places fair value at $232.43, well above the last close at $176.99. This frames the current AI equipment debate in pricing terms rather than just sentiment.

Multiyear customer investment roadmaps, especially at the leading edge in logic/foundry and HBM, are being supported by government incentives worldwide and increasing process complexity. This gives KLA visibility into continued secular capital intensity and positions the company to outperform WFE growth through 2026 while sustaining long-run revenue and FCF growth.

See why 101 investors see KLA as 24% undervalued.

Result: Fair Value of $232.43 (UNDERVALUED)

Still, tariffs pressuring margins and any further slowdown in KLA's China revenue could quickly challenge the AI backlog story on which investors are leaning.

Find out about the key risks to this KLA narrative.

Another Look At KLA’s Valuation

The first story presents KLA as 24% undervalued on analyst fair value, yet its 47.9x P/E is higher than both peers at 45.3x and the 39.9x fair ratio. That gap signals investors are already paying a premium. This could act as a cushion or create extra downside if expectations cool.

See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

Mixed signals around KLA’s AI story and valuation only matter if you act on them, so pressure test the data and weigh both the upside and the red flags by checking 3 key rewards and 2 important warning signs.

Looking for more investment ideas beyond KLA?

If KLA has sharpened your focus on AI and valuation, broaden your opportunity set now so you are not relying on a single story.

• Target durable upside with a watchlist built from 33 high quality undervalued stocks, where price and quality work harder together for you.
• Prioritise sleep-at-night resilience by hunting through 30 resilient stocks with low risk scores that pair steadier risk profiles with solid fundamentals.
• Spot the under-the-radar potential that others might skip by scanning 16 high quality undiscovered gems before the crowd catches on.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com