The semiconductor industry is entering a major growth cycle, fueled by AI, high-performance computing (HPC), advanced packaging and next-generation memory technologies. As chipmakers race to produce smaller, faster and more complex semiconductors, the demand for inspection and metrology equipment has surged. Two companies at the center of this trend are Onto Innovation, Inc. (ONTO Quick QuoteONTO - Free Report) and Nova Ltd. (NVMI Quick QuoteNVMI - Free Report) .

Per a report from Fortune Business Insights, the global semiconductor metrology and inspection equipment market size is estimated to go from $15.84 billion in 2026 to $27.56 billion by 2034, at a CAGR of 7.2%. Both companies specialize in semiconductor process control solutions, a critical category that helps manufacturers detect defects, improve yields and optimize advanced chip production. 

Modern semiconductor manufacturing demands extreme precision, as even microscopic defects can render advanced AI chips unusable. Process control companies like Onto Innovation and Nova help chipmakers detect defects, improve yields, strengthen process control, support advanced packaging and boost production efficiency. As chip complexity increases, spending on inspection and metrology tools is growing faster than overall semiconductor capital expenditures, creating a strong tailwind for both companies. As both companies benefit from industry tailwinds, investors are asking which stock is likely to generate greater shareholder value in the years ahead.

Here’s a detailed comparison of the two semiconductor equipment players.

The Case for ONTO

Onto Innovation has become a major supplier in the semiconductor industry for inspection, metrology and lithography solutions. It emphasizes advanced packaging and heterogeneous integration, technologies that are increasingly vital in the AI era. AI accelerators from companies like NVIDIA and Advanced Micro Devices depend on sophisticated chip packaging to boost performance and energy efficiency. ONTO’s Dragonfly inspection systems and Atlas packaging platforms are experiencing strong demand because they help manufacturers manage the complexity of advanced chip stacking and packaging. This positions Onto Innovation to benefit from one of the fastest-growing segments in the semiconductor industry.

Onto Innovation’s new Atlas G6 is gaining traction in gate-all-around and HBM4 DRAM applications, while record films and integrated metrology revenues reflect expanding adoption across both memory and leading-edge logic customers. The company expects the momentum to accelerate in the second half of 2026, supported by capacity expansions, rising backlog and broader product adoption, driving more than 15% sequential revenue growth. Management forecasts revenue growth above 30% for the year, fueled by AI infrastructure, HPC and silicon photonics demand. Its expanding optical process-control portfolio, strengthened by the Rigaku partnership, further enhances long-term growth prospects.

The Dragonfly platform is becoming a major growth driver for Onto Innovation. The company secured a volume purchase agreement worth more than $240 million through 2027 with an HBM customer, strengthening its exposure to the rapidly expanding AI infrastructure market. Dragonfly G5 also achieved qualification at a leading 2.5D logic customer, while strong demand for its high-throughput 3D inspection technology has fueled broader adoption across memory, logic and OSAT customers. With a growing pipeline, accelerating interest in panel-level packaging and JetStep qualifications at key AI packaging suppliers, Onto Innovation expects advanced packaging revenue to increase more than 50% in 2026.

Image Source: Zacks Investment Research

ONTO continues to expand its process-control portfolio through strategic acquisitions and partnerships. Its planned $710 million investment in Rigaku Holdings Corporation provides access to advanced X-ray technologies that complement its inspection and metrology offerings, while the earlier Semilab USA acquisition strengthened capabilities in contamination monitoring, materials analysis and surface charge metrology. Management expects the Rigaku partnership to drive earnings through high-margin software licensing, increased metrology tool sales and dividend income, while broadening Onto Innovation’s ability to address increasingly complex semiconductor manufacturing challenges and create new long-term revenue opportunities.

Despite its strengths, Onto Innovation faces several challenges. Semiconductor capital expenditures can fluctuate sharply. A slowdown in wafer fabrication spending could pressure equipment orders for Onto Innovation as it competes against larger semiconductor equipment companies, wherein maintaining a strong technological hold requires constant innovation. Moreover, it faces notable customer concentration risk, with its top three customers accounting for 49% of 2025 revenue. Operating in the capital-intensive semiconductor industry, the company is also highly exposed to geopolitical uncertainties in Asia, where disruptions could adversely impact revenue and cash flow. Management has noted supply chain woes, particularly in precision optics, as an ongoing challenge.

The Case for NVMI

Operationally, Nova faces supply-chain and manufacturing risks. The company relies on a limited number of suppliers, including sole-source vendors for certain components, and operates key product lines from single manufacturing facilities. Disruptions caused by natural disasters, geopolitical events, labor shortages, component shortages or supplier issues could impair production and delay deliveries. Like many semiconductor equipment firms, Nova relies heavily on a limited number of large customers. Reduced spending from one major client could adversely impact revenue growth.

The company also operates in the highly cyclical semiconductor capital-equipment market, where customer spending is closely tied to wafer-fab investment cycles. Competitive pressures from larger rivals such as ONTO and emerging Chinese suppliers could erode market share if Nova fails to keep pace with technological advances or customer requirements. Nova remains smaller than many semiconductor equipment competitors, limiting research spending capacity, market reach and competitive pricing power.

As an Israel-based company with significant operations and customers across Asia, Nova faces risks from regional conflicts, trade disputes, geopolitical tensions involving China and Taiwan, export restrictions and broader global economic instability. U.S. and international export-control regulations targeting advanced semiconductor technologies could further limit sales opportunities in China, while tariffs, sanctions and supply-chain disruptions may pressure demand and profitability.

Nova is also exposed to technology, cybersecurity and intellectual-property risks. Cyberattacks, data breaches or system disruptions could damage operations, finances and reputation. The company must continually protect its intellectual property while navigating patent expirations, infringement claims and litigation risks. At the same time, rapid adoption of AI technologies and open-source software introduces additional legal, security and competitive uncertainties. Regulatory compliance requirements related to environmental standards, ESG disclosures, export controls and international operations could further increase costs and complexity.

Image Source: Zacks Investment Research

Nonetheless, memory market strength continues to fuel demand for Nova. It is benefiting from strong demand for advanced DRAM and HBM technologies, which are critical to AI-driven computing infrastructure. As hyperscalers and AI chipmakers deploy more powerful processors, the need for precise process control is increasing. Nova’s optical, chemical and materials metrology solutions help semiconductor manufacturers improve yields, reduce defects and optimize production, positioning it to capitalize on growing AI-related memory investments. Nova’s Metrion platform is gaining adoption across advanced memory and logic manufacturing due to rising demand for sophisticated metrology solutions at leading-edge nodes. This strengthens its position in AI, HPC and advanced memory markets as well as competitiveness in semiconductor process control.

Share Performance Trajectory for ONTO & NVMI

In the past six months, ONTO stock has surged 86.7% while NVMI has gained 63.6%.

Image Source: Zacks Investment Research

Valuation: Discount vs. Premium

Valuation often becomes the deciding factor for investors. In terms of forward price/earnings, ONTO shares are trading at 34.36X, lower than NVMI’s 49.12X.

Image Source: Zacks Investment Research

How the Zacks Consensus Estimate Compares for ONTO & NVMI

Earnings estimates for ONTO have moved up for both 2026 and 2027 over the past 60 days.

Image Source: Zacks Investment Research

For NVMI, estimates for the current year earnings have been slightly revised downward over the past 60 days.

Image Source: Zacks Investment Research

ONTO vs. NVMI:Which Stock Has More Upside?

Onto Innovation is well-positioned to benefit from the AI-driven advanced packaging boom through its strong exposure to AI infrastructure, diversified customer base, solid cash generation and growing packaging demand. If AI chip adoption remains robust, these trends could support sustained revenue and earnings growth.

Nova offers investors focused exposure to advanced metrology and leading-edge process control, positioning it to benefit as increasing chip complexity drives higher metrology intensity. However, its smaller scale relative to larger semiconductor equipment peers may limit R&D investment, market reach and pricing power. In addition, the company relies on a concentrated customer base, making revenue growth vulnerable to spending reductions by a few major customers.

Both Onto Innovation and Nova are attractive semiconductor equipment companies benefiting from long-term industry trends. However, Onto Innovation currently appears to have the stronger overall upside profile because of its leadership in advanced packaging, strong AI exposure, diversified end-market presence and greater scale and cash generation.

ONTO currently sports a Zacks Rank #1 (Strong Buy), while NVMI carries a Zacks Rank #4 (Sell). Ultimately, in terms of Zacks rank and valuations, Onto Innovation seems to represent the more balanced investment opportunity. You can see the complete list of today’s Zacks #1 Rank stocks here.