Citi Raises Chip Equipment Price Target, AI Spending to Push Semiconductor Cycle Toward 'Equipment Side'

June 18. U.S. semiconductor equipment stocks rallied on Wednesday after Citigroup raised price targets for Applied Materials, Lam Research, and KLA while maintaining its buy ratings, citing upwardly revised AI-focused capital expenditures (capex) by large tech companies. Citi analyst Atif Malik hiked the price target for Applied Materials from $550 to $710, Lam Research from $315 to $450, and KLA from $206.40 to $290. Per Investor’s Business Daily, Applied Materials closed up 4.4% on Wednesday, hitting a new intraday high, while Lam Research also briefly touched a fresh peak. The note is viewed by markets as a signal of repricing for the global wafer fabrication equipment (WFE) sector. Citi projects that driven by investments in AI computing power, expanded storage, and advanced processes, the WFE market could grow from $145 billion in 2026 to $200 billion in 2027, and reach $250 billion by 2028. For Asian markets, this dynamic translates directly to demand for semiconductor equipment, advanced packaging, expanded storage, and fab capital spending. Previously, the market focused more on GPUs and server hardware, but investors are now extending the AI industry boom to the manufacturers of equipment used to produce AI chips themselves. A key risk: Equipment stocks have already risen sharply, leaving valuations highly sensitive to capex expectations. If cloud providers slow their AI spending or storage manufacturers tighten production expansion discipline, the profit upside for equipment makers could reverse dramatically.