Investments in AI infrastructure continue without break as major tech companies pour billions into building more data centers to power their cloud and AI services.

Thanks to its superior GPUs and accelerated computing solutions, Nvidia (NVDA) has emerged as the dominant player in this space.

However, the AI industry is not solely dependent on one player. The spending on AI expanded beyond Nvidia to include other key players in the semiconductor industry.

There’s a less flashy but equally critical player quietly dominating a key part of the supply chain, KLA (KLAC)…

That key part is the process control and metrology, critical steps that ensure the quality and reliability of each chip. 

Process control involves the monitoring and regulation of manufacturing steps, while metrology is the science of measurement used to verify that components meet precise specifications. 

KLA’s suite of tools plays an essential role in both areas, ensuring that defects are caught early and that production yields remain high.

The company doesn’t make chips. Instead, it ensures they’re made right.

Without KLA, chip yields would drop, costs would increase, and production lines would slow to a crawl.

The company controls more than half of the process control market, leaving competitors far behind. 

As chipmakers push into advanced nodes like TSMC’s 2nm technology, the demand for KLA’s tools only grows. 

These chips require near-perfect precision, and the company’s equipment is the thing standing between a flawless wafer and a costly defect.

The rise of AI and high-performance computing means that chips are getting more complex, packed with more transistors, and layered in intricate 3D designs. 

KLA’s inspection systems are critical here, especially in advanced packaging. 

Chip manufacturers like TSMC are racing to expand packaging capacity to meet AI chip demand, and KLA is right there with them, providing the tools needed to keep yields high.

Forecasts show that the semiconductor industry is on track to hit nearly $700 billion in the near term and could eventually grow to a trillion-dollar industry by 2030.

And KLA benefits from all that growth, with the process control segment growing 26% year-over-year, while wafer inspection grew by 34% in the last quarter.

Additionally, cars are becoming computers on wheels, and the chips inside them must be flawless. 

A single defect in a braking system or autonomous driving module could be catastrophic. 

KLA’s technology ensures these chips meet the highest reliability standards, a business that’s growing at 37% a year as electric and self-driving cars take off.

Financially, KLA is in a strong position. Revenue jumped 24% last quarter, with most of that coming from its core semiconductor business. 

Furthermore, 75% of its service revenue comes from long-term contracts that renew at a 95% rate, providing steady cash flow even in downturns. 

Profit margins are industry-leading, nearly double those of some competitors.

Despite this positive performance and strong tailwinds, the market only expects the company to grow 7% in the coming years.

That’s a steep contrast to the growth KLA had in the last 4 years, ranging between 12% and 16%.