Lam Research, Applied Materials estimates tweaked as Bernstein cuts spending forecast
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Lam Research (NASDAQ:LRCX) and Applied Materials (NASDAQ:AMAT) estimates were tweaked by Bernstein on Thursday as the investment firm now expects wafer fab equipment spending to fall even further than previously believed next year.
Analyst Mark Li now expects spending for wafer fab equipment to drop 25% to $72B in 2023, due in large part to significant cuts on memory spending as well as the export controls to China.
"Both companies have in fact shown strong results even in the wake of order cuts and China export controls given strong backlogs and deferred which may carry them for several quarters, but both have also articulated headwinds into next year (finally aligning with where investor expectations have been for some time)," Li wrote in a note to clients.
Li added that Lam Research (LRCX) is likely to face a "deeper revenue trough" given its higher exposure to memory spending, but also a sharper recovery once the memory market rebounds. 
"Without the new export controls we expect a 35% [year-over-year] decline in Memory spending in [2023] given bigger than expected cuts from major Memory makers," Li wrote in the note, adding that the export controls are likely to lower the wafer fab equipment market by another 9%. 
Despite the cuts, Li noted that a rebound in memory spending, along with government subsidies, offsetting capacity increases outside of China and structural capital spending are likely to bring a recovery in 2024, with memory expected to rebound "strongly," due in part to the U.S. CHIPS Act.
Li now expects wafer fab equipment spending to rise 18% in 2024 to $85B.
Li has an overweight rating on Lam Research (LRCX) and Applied Materials (AMAT), along with price targets of $500 and $130, respectively.
Last month, Bank of America said the bull case for semiconductors had started to become "compelling," mentioning Applied Materials (AMAT), among several others.