Shares in KLA Tencor Corp., one of the world's largest makers of microchip testing equipment, rose Wednesday after a Citigroup analyst said recent competition fears are overplayed.

Citibank's Timothy M. Arcuri was reacting to news overnight that competitor Applied Materials Inc. released a new chip testing product.

However, he said it was a "serious leap of faith" to assume that Applied can break into one of the most technically demanding markets in semiconductor manufacturing.

He advised investors to buy on the stock's weakness and warned that "this ship is setting sail".

KLA shares rose $3.37 or 8.4 percent to $43.24 in afternoon trading. They have traded in the last year between $35.02 and $62.67.

Arcuri maintained his "Buy" rating and $56 price target, which represents a 30 percent increase on KLA's trading price of $43.21.

Even with Wednesday's price spike, the shares were still trading 10.3 percent below the $48.16 they commanded at the start of the year.