Applied Materials, KLA Corp. upped by Barclays on back of higher chip equipment spending
Jun. 05, 2024 7:48 AM ET
By: Chris Ciaccia, SA News Editor
 sefa ozel/E+ via Getty Images
Applied Materials (NASDAQ: AMAT) and KLA Corp. (NASDAQ: KLAC) were in focus on Wednesday as Barclays upgraded the semiconductor equipment companies, as it expects higher equipment spending in 2024 and 2025.
Applied Materials rose 2% in premarket trading while KLA Corp. tacked on 1.8%.
Barclays now expects wafer fab equipment spending to hit $96.3B in 2024 and $106.4B in 2025, up from prior views of $80.6B and $89.1B, respectively. Leading edge and dynamic random access memory spending should buoy overall spending, with expected growth rates of 20% and 40% and 20% and 25% in 2024 and 2025, respectively.
Delving deeper, the analysts see the memory space as a "tale of two stories," with DRAM spend accelerating as Samsung ( OTCPK:SSNLF), Micron ( MU) and SK Hynix rush to build high-bandwidth memory capacity, largely due to artificial intelligence. Spending on NAND however, is not expected to be as robust, with expectations that it grows 35% in 2025 after a 60% decline over the past three years.
China wafer fab equipment growth is now expected to grow 5% in 2024, up from a prior view of flat spending.
"Our original thesis was that Semi Cap, as a derivative of Semis, would see the same cyclical correction post pandemic," analysts led by Tom O'Malley wrote in an investor note. "However, we saw a robust uptick in China spend and aggressive capex plans at the trailing edge in the U.S. offset some of that decline and actually bridge the gap to a more favorable environment in CY25 and beyond. We now see growth in China spend Y/Y in CY24. Looking out to 2025, we point to 2nm, HBM, and capacity buildouts in DRAM as the most likely sources of growth in WFE."
Trailing edge spending is still expected to decline sharply in 2024 and 2025, the analysts added.
O'Malley upgraded Applied Materials and KLA Corp. to Equal-Weight from Underweight and raised the price targets to $225 and $765 from $165 and $630, respectively. |
