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Investing.com -- The semiconductor equipment sector continues to show strong momentum, with several key players positioned to benefit from AI-driven demand and memory market recovery.
Citi recently updated its outlook on three leading companies in this space, highlighting their growth potential through 2026 and beyond.
Analysts at Citi have identified these semiconductor equipment manufacturers as particularly well-positioned in the current market environment, with each company offering unique advantages in the evolving semiconductor landscape.
The rankings reflect their potential for outperformance based on product positioning, growth prospects, and exposure to high-growth segments.
1. Lam Research Corp (NASDAQ:LRCX)
Citi maintains a Buy rating on Lam Research with a price target increase from $175.00 to $190.00. The company is expected to outperform the broader wafer fabrication equipment (WFE) market in 2026, with projected system and services growth of 12% and 11% year-over-year, respectively. Total sales are forecast to grow 12% annually, benefiting from increasing memory market exposure.
Citi revised its fiscal 2025/2026 EPS estimates 1%/6% higher and values LRCX using a ~31x P/E multiple on 2027 earnings, justified by secular AI tailwinds, higher services contribution (approximately one-third of total sales), market share gains, and rising equipment capital intensity.
Lam Research Corporation declared a quarterly dividend of $0.26 per share. In addition, several firms, including TD Cowen and Bernstein, raised their price targets on the company, citing factors such as strong demand and optimism about wafer fabrication equipment growth.
2. Advanced Energy Industries, Inc (NASDAQ:AEIS)
Citi maintains a Buy rating on Advanced Energy with a significant price target increase from $167.00 to $255.00.
The company reported strong September quarter results driven by momentum in its Data Center business, which is on track to more than double revenue in 2025 and grow another 25-30% next year.
This growth is supported by robust hyperscaler spending and ramping design wins.
The company is also developing high voltage DC solutions, including 800V technology, with volume production expected in 2027/2028.
While semiconductor equipment revenue may show near-term variability, AEIS anticipates acceleration starting in the second half of next year. Citi revised its 2025/2026 EPS estimates to $6.22/$8.17, applying a ~31x P/E multiple on 2026 EPS.
In a recent development, Advanced Energy Industries reported third-quarter revenue of $463 million and an EPS of $1.74, both surpassing analyst expectations. Following the results, KeyBanc raised its price target on the company to $240.
Citi maintains a Buy rating on MKS with a price target increase from $122.00 to $185.00. MKS reported strong September quarter results driven by robust demand in its chemistry equipment business, which has shown strength for four consecutive quarters.
The company’s AI-related chemistry revenue has grown from 5% to 10%, with further upside potential. While NAND-related demand may fluctuate, MKS has exposure to approximately 1-2% of the $40 billion NAND upgrade opportunities expected over the next few years.
Citi raised its 2025/2026 EPS estimates to $7.67/$8.87 and increased its price target based on a higher 21x P/E multiple (up from 16x) on 2026 EPS, reflecting the growing AI sales contribution and sector-wide multiple expansion.
MKS Instruments announced third-quarter results that exceeded forecasts, with revenue of $988 million and an EPS of $1.93. The company also received price target increases from firms including KeyBanc and Mizuho.
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