Citi (C) recently released a research report significantly raising the target prices for leading semiconductor equipment companies Applied Materials (AMAT), Lam Research (LRCX), and KLA (KLAC), with the core rationale being a strongly bullish outlook on NAND equipment demand. Boosted by this news, Applied Materials’ stock rose approximately 4% in pre-market trading on Wednesday, while KLA and Lam Research also posted gains of over 3%.
Citi analysts pointed out that the widening DRAM supply gap is accelerating the adoption of complementary storage solutions such as key-value cache offloading. In a bullish scenario, the firm projects that the global wafer fab equipment market will reach approximately $145 billion, $200 billion, and $250 billion in 2026, 2027, and 2028, respectively, with a robust 25% growth still expected in 2028. Considering the ongoing capacity constraints and expansion plans of TSMC (TSM) and memory chip makers, as well as recent developments at Intel and Samsung’s foundry operations, Citi maintains a positive outlook on the equipment market for 2028.
The report emphasizes that the rise of agentic artificial intelligence is triggering a “structural growth” in NAND demand. Multi-step reasoning workflows have dramatically expanded the footprint of key-value caches, making total memory demand far exceed what high-cost HBM and DRAM can efficiently support, especially against the backdrop of constrained DRAM supply and high prices. This shortfall does not signify weakened demand but rather highlights the widening imbalance between memory supply and demand, prompting companies to accelerate the adoption of solutions like key-value cache offloading, which transfers intermediate model states to lower-cost, higher-capacity storage tiers. Combined with innovations in high-performance NAND such as HBF and XL-Flash, both cloud and edge-side applications are increasingly relying on NAND to scale capacity and control costs in order to support ever-more-complex agentic workloads.
Based on the above outlook, Citi has for the first time introduced earnings forecasts for these three companies for the calendar year 2028 and raised their target prices based on their projected profitability that year. Specifically, Applied Materials’ target price was raised from $550 to $710, with the model projecting its total revenue to grow by 30% and 22% year-over-year in 2027 and 2028, respectively. Lam Research’s target was increased from $315 to $450, with projected total revenue growth of 28% and 22% over the same periods. KLA’s target was raised substantially from $206.4 to $290, with the firm estimating total revenue growth of 24% and 22% in 2027 and 2028, respectively, and the new valuation is based on a 40x price-to-earnings multiple on 2028 earnings per share.
