Citi sees '99B reasons to stay long' chip equipment stocks, new highs expected
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Investment firm Citi said on Friday that it sees "99 billion reasons to stay long" semiconductor equipment stocks after attending the SEMICON West conference, citing an expected recovery in chip equipment spending in 2024.
Comments from Tokyo Electronic, whom analyst Atif Malik met at the conference, suggest that wafer equipment spending will be $99B in 2024, while Citi is estimating $88B, aided by mature logic spending across the U.S., Europe and China and stronger spending for memory, both in dynamic random access memory and NAND. 
"Tokyo Electronâs 2024 [wafer fab equipment] view is supportive of our cyclical recovery phase 2 group call and we expect the equipment stocks to make new highs through the year as upward estimate revisions as a % of total estimate revisions are still ~30% below prior peak levels," Malik wrote in an investor note.
Malik also met with executives from Entegris (NASDAQ:ENTG), which the firm has an overweight rating and a per-share price target of $94 on, including CFO Linda LaGorga.
Malik said Entegris (ENTG) is "on track" to achieve synergies from its CMC materials acquisition and boost gross margins. 
"When market recovers, volume will help with margin overtime," Malik added. "Product mix and new facilities will also help with margins. Note that [Microcontamination Contro] business has the highest margin." 
Malik also said that Entegris (ENTG) is spending roughly $500M in capital expenditures and the company has gotten "some local support" for its Colorado Springs factory, with potential for more from the U.S. CHIPs Act.
Malik added that the company's free cash flow is being used to pay down debt, bring down inventory and potential acquisitions. 
Regarding AI, Malik said Entegris (ENTG) is "well diversified" and not over or under exposed to AI, with the company's management excited for long-term growth.
Related tickers: Entegris (ENTG), Lam Research (LRCX), Applied Materials (AMAT), KLA Corp. (KLAC), ASML Holding (ASML), Micron Technology (MU)
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