On Thursday, Citi expressed a positive stance on Applied Materials (NASDAQ:AMAT) and Lam Research (NASDAQ:LRCX), ahead of the 2024 SEMICON West event scheduled for July 9-11 in San Francisco.
The firm anticipates an increase in wafer fabrication equipment (WFE) spending in the second half of the year compared to the first, with a focus shift in foundry and logic spend towards leading-edge nodes as Gate-All-Around (GAA) technology advances from mature nodes. Memory investments are expected to continue centering on High Bandwidth (NASDAQ:BAND) Memory (HBM) DRAM near term, with a projection of higher NAND spend next year as manufacturers transition to approximately 200-layer technology to satisfy the demand for high-capacity AI storage.
The firm's outlook is buoyed by expectations that the Street's 2025 WFE projections of around $115 billion, or a 13% year-over-year increase, may not fully account for the estimated $70 billion incremental AI WFE opportunity through 2027. This opportunity is based on a total addressable market (TAM) of $400 billion for AI data center semiconductors. Citi's own forecast for 2025 WFE stands at $120 billion.
Citi's commentary underscores the potential for significant growth in the semiconductor equipment market, driven by the expansion of artificial intelligence (AI) applications and the corresponding need for advanced semiconductor technology. The firm's preference for Applied Materials and Lam Research, along with smaller cap stocks like Nova Measuring Instruments Ltd. (NASDAQ:NVMI) and Veeco Instruments Inc. (NASDAQ:VECO), is rooted in the anticipated demand surge for semiconductor equipment.
The positive outlook on Applied Materials and Lam Research by Citi comes as the semiconductor industry prepares for the upcoming SEMICON West trade fair, an event that will likely provide further insights into industry trends and company strategies. The anticipation of higher WFE spending in the latter half of the year, along with the projected increase in NAND investment next year, signals a robust period for the semiconductor equipment sector.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.