Three of the world's largest semiconductor equipment makers hit all-time highs after Citigroup raised price targets on Applied Materials and Lam Research, citing a bullish NAND outlook.
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Applied Materials jumps 8% to record as chip equipment stocks rally
Applied Materials surged 8% to a record, while ASML and Lam Research each gained more than 5%, as Citigroup's NAND upgrade lifted chip equipment stocks.
"We see a multi-year upcycle in NAND equipment demand driven by AI storage requirements and the transition to higher-layer 3D NAND," Citigroup analyst Christopher Danely, who raised his price targets on Applied Materials and Lam Research, said in a note to clients.
The Philadelphia Semiconductor Index rose alongside the moves, with Aehr Test Systems jumping more than 13%. Kulicke & Soffa Industries Inc., which supplies wire bonding and advanced packaging equipment for AI chips, also hit a 52-week high, climbing 3.3% after its earnings per share nearly tripled. The global semiconductor equipment market was valued at more than $138 billion in 2025, according to industry data.
The coordinated rally shows that institutional investors are betting on a sustained capital expenditure cycle in memory and logic chips. UBS estimates Micron Technology Inc. will spend more than $50 billion on capacity over the next five years, a portion of which flows directly to equipment makers. Applied Materials trades at roughly 22 times forward earnings, while Lam Research commands about 24 times — multiples that reflect the market's conviction that AI-driven fab construction has years left to run.
NAND Spending Becomes the Next Catalyst
Memory chip makers have accelerated their transition to 300-plus layer 3D NAND, a process that requires more deposition and etch steps per wafer. Each additional layer increases the number of passes through equipment from Applied Materials and Lam Research, making NAND a higher-intensity consumer of capital equipment per unit of output than logic chips. Citigroup's upgrade specifically called out this dynamic, arguing that the NAND equipment trough has passed and that orders are inflecting higher.
AI Demand Creates a Two-Track Boom
While NAND spending is recovering, the AI-driven buildout of data centers continues to drive demand for leading-edge logic equipment. ASML's extreme ultraviolet lithography systems, which cost more than $350 million each, remain the bottleneck for producing the most advanced AI accelerators from Nvidia Corp. and Advanced Micro Devices Inc. TSMC, the sole manufacturer of Nvidia's H100 and Blackwell-series chips, has committed to expanding its CoWoS (chip-on-wafer-on-substrate) advanced packaging capacity, benefiting equipment suppliers across the board.
For investors, the question is whether the current valuations already price in the NAND recovery. Applied Materials has gained roughly 40% year to date, while Lam Research is up a similar magnitude. Both trade above their five-year average forward P/E multiples. Morgan Stanley's Joseph Moore has maintained an overweight rating on Lam Research, arguing that the NAND recovery is "still in its early innings" and that consensus estimates for 2027 have room to rise. The next catalyst is Micron's quarterly earnings, expected in late June, which will provide the first official read on NAND pricing and capex plans.
This article is for informational purposes only and does not constitute investment advice.
