The global semiconductor manufacturing equipment and materials industry is growing by leaps and bounds, buoyed by artificial intelligence (AI)-driven capital expenditure in leading-edge logic, high-bandwidth memory (“HBM”) and Test and Packaging components. 

On July 14, SEMI reported in its Mid-Year Total Semiconductor Equipment Forecast – OEM Perspective that the market size of this industry is expected to reach a record high of $165.9 billion globally in 2026, up 23.2% year over year. The momentum is set to continue in the near term, reaching an estimated $229.5 billion globally in 2028.

Here, we recommend three stocks from this space for investment to reap benefits from a potentially vast market. These companies are: Entegris Inc. (ENTG Quick QuoteENTG - Free Report) , Ultra Clean Holdings Inc. (UCTT Quick QuoteUCTT - Free Report) and FormFactor Inc. (FORM Quick QuoteFORM - Free Report) . 

Each of our picks currently carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. 

The chart below shows the price performance of our three picks year to date.

Image Source: Zacks Investment Research

Entegris Inc.

Zacks Rank #1 Entegris serves materials, contamination control, equipment and fab construction applications, allowing growth across different phases of semiconductor investment.

AI-related investment supports ENTG’s materials and purity products across advanced logic, memory and packaging. Advanced logic represents about 40% of revenues and memory about 30%. In the third quarter of 2026, ENTG secured a 2-nanometer EUV filtration application, an advanced materials plan of record with a major technology provider and multiple CMP wins with memory customers.

ENTG’s margin progress reflects strong execution and mix. Adjusted gross margin reached 48.9% in the third quarter of 2026, up from 43.6% a year earlier and 47.6% in the second quarter. Adjusted operating margin increased to 26.8% from 21.1%, while adjusted EBITDA margin rose to 30.2% from 27.3% year-ago. APS adjusted segment margin reached 34.4%.

Strong Guidance

For the fourth quarter of 2026, Entegris expects revenues between $1.025 billion and $1.055 billion, implying about 26% year-over-year growth at the midpoint. GAAP earnings are projected at $1.09-$1.17 per share, while non-GAAP earnings are forecast in the range of $1.32-$1.40.

Management projects an adjusted gross margin of 49.2%-49.7% and an adjusted EBITDA margin of 30.7%-31.2%. Non-GAAP operating expenses are anticipated between $224 million and $230 million. ENTG expects approximately $200 million in capital expenditures for 2026, down from the earlier $250 million plan.

Solid Estimate Revisions

Entegris has an expected revenue and earnings growth rate of 17% and 58.6%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 10.9% over the past 30 days. 

ENTG has an expected revenue and earnings growth rate of 14.3% and 28.1%, respectively, for the next year. The Zacks Consensus Estimate for next year’s earnings has improved 12.7% over the past 30 days. 

Ultra Clean Holdings Inc.

Zacks Rank #2 Ultra Clean reported solid third-quarter 2026 results and its outlook benefits from rising semiconductor equipment demand as AI investment expands across foundry, logic and memory. 

UCTT is benefiting from semiconductor capital equipment investment tied to AI infrastructure, with demand broadening across foundry, logic and memory. Leading-edge foundries are expanding capacity for advanced nodes, while memory manufacturers are investing in DRAM, high-bandwidth memory and advanced packaging. 

Ultra Clean's UCT 3.0 strategy aims to capture this growth through additional manufacturing capacity and higher-value engineered solutions. UCTT’s outsourced model, capacity growth and closer customer design work support share gains. Higher utilization and a richer mix of engineered subsystems offer room for margin expansion. Services should add higher-margin revenue as new fabs increase wafer starts.

Strong Guidance

For the fourth quarter of 2026, Ultra Clean expects revenues between $800 million and $860 million. The midpoint implies sequential revenue growth of approximately 9.4%. UCTT projects non-GAAP earnings per share between $1.11 and $1.35, based on around 48.9 million diluted shares. GAAP earnings per share are expected between $1.02 and $1.26.

Solid Estimate Revisions

Ultra Clean has an expected revenue and earnings growth rate of 34.8% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 11.8% over the past 30 days. 

UCTT has an expected revenue and earnings growth rate of 36.8% and 95%, respectively, for the next year. The Zacks Consensus Estimate for next year’s earnings has improved 0.6% over the past 30 days. 

FormFactor Inc.

Zacks Rank #1 FormFactor is benefiting from robust growth in HBM driven by the rapid adoption of generative AI and high-performance computing. FORM’s advanced packaging continues to raise test complexity in DRAM, particularly as HBM evolves toward faster interfaces. Third-quarter 2026 DRAM revenues held near the second-quarter record at $84.9 million despite a shift from HBM to DDR5. 

FormFactor's SmartMatrix technology supports testing of completed HBM4 stacks at speeds above 10 gigabits per second. Management expects HBM growth to continue through 2027, citing its HBM4E and HBM5 design pipeline and differentiated final-stack test capability.

FORM’s co-packaged optics (CPO) is moving toward production and expanding the Systems opportunity. Systems revenue reached a record $59.5 million in third-quarter 2026, up 23% sequentially, on higher TRITON photonics system demand. Management raised its 2026 TRITON revenue expectation to upwards of $30 million from the initial $10 million to $20 million range. 

FORM also serves near-package optics and pluggable applications through wafer-level photonic integrated circuit testing. Its integrated Keystone optical probing technology broadens exposure as customers adopt different photonics architectures.

Strong Guidance

For the fourth quarter of 2026, FormFactor expects revenues of $285 million, plus or minus $10 million, reflecting continued broad-based demand. Non-GAAP gross margin is projected at 54%, plus or minus 150 basis points. Non-GAAP earnings are expected to be 95 cents per share, plus or minus 9 cents.

At the midpoint of its fourth-quarter outlook, FORM expects 2026 revenues to exceed $1 billion for the first time. The company continues to target a longer-term operating model of $1.6 billion in revenues, 55% gross margin and $5 in non-GAAP earnings per share.

Solid Estimate Revisions

FormFactor has an expected revenue and earnings growth rate of 33% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 9.2% over the past 30 days. 

FORM has an expected revenue and earnings growth rate of 21.7% and 29.9%, respectively, for the next year. The Zacks Consensus Estimate for next year’s earnings has improved 15.9% over the past 30 days.