Applied Materials, Lam Research rise as Needham upgrades pair
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Applied Materials (NASDAQ:AMAT) and Lam Research (NASDAQ:LRCX) shares rose more than 1% in pre-market trading on Friday as investment firm Needham upgraded the pair of semiconductor equipment companies, citing an estimated increase in wafer fab equipment spending.
The investment firm sees wafer fab equipment spending in 2023, 2024 and 2025 at $90B, $90B and $100B, respectively. The above consensus call for this year is due to the "exceptional" strength of ASML (ASML) and Chinese semiconductor capital equipment spending, while 2024 and 2025 are also above consensus.

The firm upgraded Lam Research (LRCX) and Applied Materials (AMAT) to buy from hold and put price targets of $800 and $180, respectively on the pair.
In addition, Needham said that memory wafer fab equipment spending will likely normalize by 2025, when it is expected to be roughly 40% of total wafer fab equipment spending.
Regarding Lam Research (LRCX), Needham said it expects the company will become the best-performing wafer fab equipment supplier in the next semiconductor cycle, with the shift towards memory to support outperformance for the next two years.
Needham said that while Applied Materials (AMAT) might be earning more than it should in 2023, it's possible the stock price has been depressed by investor expectations on worries of a "demand airpocket" in the first-half of 2024. Needham also said that the spending on wafer fab equipment spending is likely to shift from foundry and logic to memory over the next two years, which while it may not give a tailwind, the company's "balanced" exposure should lead to meaningful growth in 2025.
Analysts are largely bullish on Applied Materials (AMAT). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates AMAT a HOLD.


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