Onto Innovation Inc. (ONTO) concluded a turbulent holiday-shortened week on a down note, with shares closing at $258.24 on Friday, a decline of 0.2% from the prior session. The stock's performance lagged behind the broader market, as the S&P 500 and Nasdaq Composite both reached new record highs, driven by continued enthusiasm for artificial intelligence-related technology names.
The week's trading saw ONTO shares surge 4.6% on Tuesday, reaching an intraweek high of $274.17, before succumbing to selling pressure over the next three sessions. By Friday's close, the stock had fallen below its pre-Memorial Day level of $262.25, highlighting the volatile nature of the AI hardware trade.
Onto Innovation specializes in metrology and advanced packaging equipment, critical tools for chipmakers to ensure quality control and enable faster data processing through chip stacking. These segments have attracted investors seeking exposure to AI server growth, but the stock's rapid gains have been met with equally swift pullbacks, suggesting the market is reassessing valuations.
First-quarter revenue hit a record $291.9 million, a 9.5% increase year-over-year. The company guided second-quarter revenue in the range of $320 million to $330 million. CEO Mike Plisinski expressed optimism about customer demand, particularly for the Dragonfly G5 and Atlas G6 systems, as well as growth in Asian factories, which he described as critical for customers' aggressive ramp plans.
During the May 5 earnings call, Plisinski projected over 30% revenue growth for 2026, citing robust demand from high-performance computing and related technologies. He noted that Dragonfly G5 demand continues to expand, with additional shipments expected in the second, third, and fourth quarters.
Analysts remain largely bullish on Onto Innovation. Oppenheimer's Edward Yang raised his price target from $350 to $370 this month, maintaining an Outperform rating. He dismissed the post-earnings dip as temporary, arguing that investors will eventually return to the stock given its strengthening fundamentals.
However, the company's financing activities have added complexity. On May 18, Onto priced an upsized $1.3 billion offering of 0.00% convertible senior notes due 2031. The notes can be converted into stock at approximately $381.80 per share. Proceeds may be used to fund a planned 27% stake in Rigaku Holdings, a move that could diversify the company's business but also introduces integration risks.
Downside risks remain, including potential cuts in chipmaker capital spending, rising material and freight costs that could compress margins, and delays in the Rigaku deal. Management has flagged concerns about customer spending, trade regulations, supply chain sourcing, and the timing of Rigaku's contributions.
Investor attention will now turn to Onto's upcoming meetings at the Evercore 2026 TMT Global Conference on June 2 and the Stifel 2026 Boston Cross Sector 1×1 Conference on June 3. These events could provide clarity on the company's outlook and the sustainability of its AI-related momentum.
