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Investing.com -- Goldman Sachs initiated coverage on U.S. semiconductor capital equipment, storage, and foundry stocks in a note Thursday, holding a “balanced view,” highlighting mid-cycle dynamics that present selective opportunities.
The firm issued Buy ratings on Lam Research (NASDAQ:LRCX), Applied Materials (NASDAQ:AMAT), Seagate, and SanDisk, while assigning Sell ratings to Teradyne (NASDAQ:TER) and MKS Instruments (NASDAQ:MKSI).
“We believe the Semiconductor Capital Equipment industry is in a mid-cycle state, with both headwinds and tailwinds creating relatively stable revenue dynamics,” Goldman analysts said.
While the market outside China has been in a “clear, shallow downcycle” since 2022, growth in China has helped sustain the sector.
“Although we see more downside than upside risks, we think ‘stable’ revenue through 2026 is the most likely outcome,” wrote the bank’s analysts.
Goldman’s bullish picks are shaped by evolving technical demands. “We are in the process of shifting from lithography-driven CapEx to etch/deposition-driven CapEx in 2025/26,” the firm wrote, citing new process requirements tied to Gate-All-Around and stacking technologies.
That shift is said to favor Lam Research and Applied Materials, which Goldman rated Buy with price targets of $115 and $225, respectively.
In storage, Goldman sees upside in both HDD and NAND cycles. “Although the HDD industry has been in a cyclical upturn, we believe more upside to the stocks remains – with STX our preferred way to gain exposure,” the note said, assigning Seagate a $170 price target.
The firm is more cautious on Teradyne and MKS, citing limited upside and macro headwinds, while rating KLA, Entegris (NASDAQ:ENTG), Micron (NASDAQ:MU), Western Digital (NASDAQ:WDC), GlobalFoundries (NASDAQ:GFS) and Amkor (NASDAQ:AMKR) Neutral.
“China represents more opportunity than threat for U.S. Semi Cap companies,” Goldman added, noting that strategic onshoring has helped de-risk Chinese exposure across the sector.