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Investing.com —A blowout quarterly report from memory titan SK Hynix has reignited the global semiconductor trade. Delivering a staggering 632% surge in operating profit alongside a planned $75.5 billion shareholder return, the South Korean chipmaker revealed an even bigger catalyst: the artificial intelligence memory shortage will persist through at least 2030, with over half of its 2027 and 2028 production capacity already sold out under long-term agreements.
Yet in an industry infamous for brutal boom-and-bust cycles, explosive earnings often trigger immediate fears of a cyclical peak. But this deficit cannot be solved overnight—eliminating the bottleneck requires producers to pour billions into new cleanrooms, wafer fabrication systems, and complex 3D packaging.
InvestingPro's screening models look at the broader fundamental picture across the supply chain—tracking sustained free cash flow, margin expansion, and valuation discounts rather than short-term price spikes. Ahead of the monthly rebalance, our AI-picked tech strategy filters out hundreds of speculative names to ensure only the highest-conviction enablers make the cut—including custom silicon designers, ion implantation specialists, and two deeply discounted equipment leaders positioned to capture the memory windfall.
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Solving the packaging bottleneck for high-bandwidth memory
To alleviate severe memory shortages, chipmakers cannot simply produce more silicon wafers; they must stack them. High-bandwidth memory (HBM) requires stacking up to 16 dynamic random-access memory dies interconnected by microscopic through-silicon vias, where a single undetected defect can ruin an entire processor stack.
That makes Onto Innovation Inc (NYSE:ONTO)an essential enabler of the memory expansion. In fact, SK Hynix recently honored Onto Innovation with its Best Partner Award for Technology Achievement—the only company recognized—specifically for developing the defect prevention and metrology systems used on its cutting-edge HBM lines.
Despite its critical technological moat, Onto shares tumbled nearly 32% during October's tech pullback to trade near $214. Yet operational fundamentals point in the opposite direction. In its latest quarter, Onto delivered record revenue of $343.1 million, up 35% year-over-year, while expanding gross margins to 57%. Supported by a single $200 million order for its Dragonfly G5 inspection platform, total backlog surged past $1.1 billion, with roughly 40% extending into 2027.
Investors can see in the Onto Innovation Pro Research Report, Wall Street sentiment remains exceptionally constructive, with 8 upward EPS revisions and zero downward revisions over the past 90 days as forward earnings are projected to expand 64% this year.
Track Onto Innovation's HBM backlog and margin forecasts: Access the ONTO Pro Research Report on InvestingPro
Wafer fabrication infrastructure for the multi-year buildout
While Onto inspects advanced packaging, expanding global memory capacity requires immense wafer fabrication infrastructure. That puts Applied Materials Inc (NASDAQ:AMAT)—the world's largest semiconductor equipment supplier—at the center of the capital expenditure wave.
Applied Materials maintains deep operational ties with SK Hynix, including a joint initiative inside Applied's newly unveiled $5 billion EPIC research center in Sunnyvale. That collaboration is already translating into remarkable top-line momentum: in its latest quarter, Applied Materials reported that its DRAM equipment revenue surged 52% year-over-year to record levels, propelling overall net sales to $9.12 billion.
Like Onto, Applied Materials was caught in October's broader tech sell-off, dropping 25.2% to trade near $395.93. That cyclical retreat contrasts sharply with internal execution. The company has now posted 13 consecutive quarters of year-over-year gross margin expansion, while 25 Wall Street analysts have raised forward earnings estimates over the last 90 days against zero downgrades.
Positioning for the memory rotation ahead of November
SK Hynix's record earnings and multi-year backlog confirm that memory demand is accelerating rather than slowing. Yet attempting to trade volatile semiconductor cycles manually often leads investors to sell during temporary dips right before structural expansions resume.
Rather than trying to time cyclical bottoms, data-driven strategies weed out value traps to isolate only top-tier cash generators. ProPicks AI evaluates thousands of metrics each month to ensure investors hold strictly the highest-quality semiconductor plays. While Onto Innovation and Applied Materials represent two compelling beneficiaries, the complete roster of top-rated winners—along with the fresh buys dropping in the November 1st rebalance—is available exclusively to subscribers.
To stop guessing and see which market-beating stocks made the cut for the month ahead, full access costs just $9 a month.
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Disclosure: The author holds no position in the stocks mentioned. Data and financial metrics as of October 28, 2026.
Original Article
SK Hynix sparks a chip rally: Two oversold enablers primed to rebound
