After the surge in chip stocks, semiconductor equipment manufacturers become the new hotspot in the AI "gold rush."

According to the Zhitong Finance APP, chip stocks have become a popular choice for investors betting on the artificial intelligence (AI) sector. However, after significant price increases in companies like Broadcom (AVGO.US), investors are starting to turn their attention to a frequently overlooked sector—semiconductor equipment suppliers. Teradyne (TER.US) is a chip testing equipment supplier whose stock price has nearly doubled since its low in April, rising over 40% since the end of July. Meanwhile, the two largest semiconductor manufacturing equipment manufacturers in the U.S., Lam Research (LRCX.US) and KLA (KLAC.US), are the fourth and sixth best-performing stocks in the Philadelphia Semiconductor Index, with gains exceeding 68% this year. Earlier this month, Lam Research saw its stock rise for 14 consecutive trading days, marking the longest streak in the company's history, during which its stock price surged by 36%. Peer Applied Materials (AMAT.US) has also just set a record with eight consecutive days of gains, accumulating a 20% increase. The chip equipment sector is in high demand. As companies like Microsoft (MSFT.US) and Alphabet (GOOGL.US) continue to increase their investments in the AI field, and many chip manufacturers' valuations become increasingly high, equipment suppliers have become targets for investors, even though their valuations are no longer as attractive as when investors first began to flock to them. Haris Khurshid, Chief Investment Officer of Karobaar Capital, stated, "The market is clearly ahead of the next wave of AI capital expenditure, betting that foundries and cloud service providers will continue to invest heavily. The issue is that valuations are already high, so any pause in orders or slowdown in spending could quickly cause a shock." The storage hardware sector has also experienced a similar surge. Micron Technology (MU.US) has seen its stock price rise over 90% this year due to a significant increase in demand for high-bandwidth memory, which is critical for AI computing. Lam Research and KLA are suppliers to Micron Technology. Meanwhile, South Korean competitors Samsung Electronics and SK Hynix, which compete with Micron in the memory market, are Teradyne's largest customers. Given the strong demand outlook for testing equipment in the memory market, Susquehanna analyst Mehdi Hosseini raised Teradyne's target price from $133 to $200 last week. Teradyne closed at $134.33 on Monday, indicating an upside potential of 49%. Hosseini noted that Teradyne's influence is expanding in several testing areas, such as wafer sorting, stating, "This is a positive, gradual development, and we believe it is not fully reflected in the current stock price." One concern is that even investments in AI targets like semiconductor equipment are starting to become expensive, and the risk will increase if investment slows down. Lam Research was recently downgraded by analysts at KeyBanc Capital Markets, as they believe that relative to its stock price increase, "the market generally expects or actual profitability will not see a corresponding improvement anytime soon." KLA was also downgraded by Morgan Stanley and CFRA last week. At the beginning of this year, the expected price-to-earnings ratio for Lam Research and KLA was around 20 times, and it is now close to 30 times. Although this is still lower than Broadcom's 36 times, it is higher than the average level of the Philadelphia Semiconductor Index. Teradyne's expected price-to-earnings ratio is 32 times, which is even more expensive than NVIDIA. Adam Rich, Deputy Chief Investment Officer and Portfolio Manager at Vaughan Nelson, stated, "This wave of gains seems unsustainable, as it appears that the explosive growth of AI investments is the only way to maintain the upward trend, but that seems unlikely. Right now, everyone is making profits; if you are involved in AI trades, that's great, but no one can win forever."