Reassessing KLA (KLAC) Valuation As Strong Recent Returns Meet Mixed Fair Value Signals

Why KLA (KLAC) is on investors’ radar today

KLA (KLAC) shares recently closed at US$1,487.66, with the stock showing a small 1-day decline but a gain over the past week, prompting investors to reassess its recent performance and fundamentals.

See our latest analysis for KLA.

While the latest 1-day share price return was a 0.56% decline, KLA’s 90-day share price return of 29.83% and 1-year total shareholder return of 103.23% indicate strong recent momentum over both shorter and longer periods.

If KLA’s run has you looking for other chip related opportunities, it could be worth scanning our list of 34 AI infrastructure stocks as a starting point for further ideas.

With KLA trading around US$1,487.66 and sitting roughly 12% below the average analyst price target, the key question is whether the stock still offers upside or if the market is already pricing in future growth.

Most Popular Narrative: 13.3% Overvalued

The most followed narrative pegs KLA’s fair value at $1,312.45, which sits below the recent close of $1,487.66, setting up a valuation gap worth understanding in more detail.

KLA Corporation (KLAC) stands as the indispensable gatekeeper of the semiconductor world, currently trading at $1,496.00 as of the market close on February 20, 2026. As chip architectures move toward 2nm and beyond, the "process control intensity", the amount of inspection and measurement required per wafer, is increasing significantly. KLA owns over 50% of this market, and in early 2026, it is benefiting from the AI infrastructure buildout.

Read the complete narrative.

Curious how a company with this kind of market share and record-free cash flow still screens as overvalued? The narrative leans on robust margin assumptions, steady mid single digit revenue expansion and a rich earnings multiple carried well into the next decade. Want to see exactly how those moving parts add up to that $1,312.45 fair value.

Result: Fair Value of $1,312.45 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, investors still need to weigh export restrictions on China and any margin pressure from bundled inspection tools at rivals, which could challenge this overvaluation thesis.

Find out about the key risks to this KLA narrative.

Another View: What P/E Is Telling You

Our DCF coverage points to KLA trading above an estimated future cash flow value of $807.59, but the market is not completely ignoring fundamentals. The current P/E of 42.8x is roughly in line with the US semiconductor industry at 43x and sits well below a 51.4x peer average, although still above a 37.2x fair ratio that the market could move toward. For you, that mix of alignment and stretch raises a simple question: is this more a quality premium or a risk that sentiment cools?

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

Next Steps

If this mix of enthusiasm and caution feels familiar, do not sit on the sidelines. Instead, pressure test the story yourself by reviewing the 3 key rewards for KLA.

Looking for more investment ideas?

If KLA has sharpened your focus on quality, do not stop here. Use the screener to uncover more names that could suit your portfolio and goals.

• Target potential mispricings by hunting through our list of 55 high quality undervalued stocks that combine strong fundamentals with more reasonable market expectations.
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• Prioritise resilience by scanning 80 resilient stocks with low risk scores where balance sheets and risk scores help you sleep better at night.

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.

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