MW These stocks are 'the place to be' if you want serious AI growth, says BofA
By Britney Nguyen
Analysts like the strong multiyear growth potential that chip-equipment companies may hold
Wall Street analysts named Applied Materials as a top pick among chip-equipment names.
As some corners of the artificial-intelligence trade lose steam, analysts see further promise in chip-equipment stocks, which have been standout gainers so far this year.
Semiconductor-equipment makers are seen as major beneficiaries of AI demand as hyperscale cloud providers look to spend even more money on compute. Momentum is expected to continue through next year, which is one reason why some analysts are so upbeat.
Lam Research $(LRCX)$, KLA $(KLAC)$ and Applied Materials (AMAT) have all pointed to "an unusually robust environment" for wafer-fab equipment this year, Bank of America analyst Vivek Arya said. Their revenue guidance reflects a minimum expectation for high-teens growth rates, though growth could actually top 20%, he wrote in a Sunday note. Wafer-fab equipment is a subset of the wider semiconductor-capital-equipment, or semicap, market.
"Semicaps the place to be for accelerating AI growth," Arya titled his note. He now expects wafer-fab-equipment revenue to hit $140 billion in 2026 and $171 billion in 2027 across the industry, whereas he was previously forecasting $131 billion and $150 billion, respectively. By 2030, Arya sees revenue climbing to $201 billion.
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As chip makers make progress on product road maps and agentic-AI adoption rises, Arya said competition for leading-edge chip capacity will intensify. He pointed to the "especially crowded" market for Taiwan Semiconductor Manufacturing Co.'s $(TSM)$ (TW:2330) current 3-nanometer process node that includes Nvidia (NVDA), Advanced Micro Devices $(AMD)$, Google $(GOOGL)$ $(GOOG)$ and Amazon.com (AMZN).
And it's not only graphics processing units and application-specific integrated circuits for AI that are driving chip-wafer demand.
As focus shifts more to inference, or the process of running AI models after training, interest in central processing units for data-center servers has soared in recent months. Demand for CPUs is outstripping supply to the point of becoming another AI bottleneck, Arya said, and both Intel $(INTC)$ and AMD are reportedly raising CPU prices by between 10% and 15%. Nvidia's Vera CPU for its upcoming Rubin platform will likely lead to "further tightness" since one chip rack includes 156 CPUs, he noted.
Similarly, the memory-chip market is severely undersupplied, but manufacturers that were once reluctant to add capacity are now securing clean-room space. That could be another tailwind for chip-equipment makers.
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SK Hynix (KR:000660), Samsung Electronics (KR:005930) and Micron Technology $(MU)$ are the top three producers in the world of high-bandwidth memory, which is made by stacking multiple dynamic-random-access-memory dies. The silicon intensity of HBM "is compounding existing capacity tightness," leading to more investments into new manufacturing space that should see DRAM wafer-fab-equipment revenue grow more than 30% this year to $40 billion, Arya said.
With chip manufacturers adding capacity and the technology itself becoming more complex to build, Arya sees "an unparalleled opportunity for leading semicaps to deliver multiyear high growth, share gains and record margin expansion."
Arya named Lam and Applied Materials as his top picks among large semicap stocks, while tapping MKS $(MKSI)$ and Advanced Energy Industries $(AEIS)$ among small- and midcap stocks.
Cantor Fitzgerald analyst C.J. Muse was also upbeat about chip-equipment makers in a Monday note, naming Applied Materials, KLA, Lam and ASML Holding $(ASML)$ as his top picks in the industry.
Despite geopolitical uncertainties weighing on the broader market and worries over AI development, Muse said he thinks "we are in the early innings of a multiyear secular uplift for the semi-equipment industry."
Like Arya, Muse raised his revenue estimate for wafer-fab-equipment makers to $140 billion, from $135 billion for 2026. He emphasized, however, that upside will likely be limited to between $140 billion and $145 billion as clean-room availability remains in short supply. Still, he sees revenue reaching $200 billion by 2028.
"While impossible to have precise granularity that far out, it does seem obvious to us that extended lead times and global semiconductor shortages will lead to growth in the next three years," Muse wrote.
-Britney Nguyen
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March 30, 2026 15:08 ET (19:08 GMT)
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