Applied Materials (AMAT) shares surged 9.7% on Wednesday, reaching a new 52-week high of $623.35, after Citi raised its price target on the semiconductor equipment maker from $550 to $710 while maintaining a Buy rating. The rally reflects growing investor optimism around accelerating artificial intelligence spending and rising demand for memory-related chip manufacturing equipment.
Citi Sees Strong Growth in Chip Equipment Spending
Citi analyst Atif Malik argued that major technology companies continue to increase spending on AI infrastructure, creating a favorable backdrop for semiconductor equipment suppliers. Applied Materials, along with peers Lam Research and KLA Corp., manufactures wafer fabrication equipment used to convert silicon wafers into semiconductors. Lam Research rose more than 5%, and KLA advanced nearly 3% after Citi raised its targets on those companies as well.
According to Citi, the global wafer fab equipment market could experience significant growth over the next several years. The bank estimates the market is worth approximately $145 billion this year and projects it could reach $200 billion in 2027 and $250 billion in 2028. The outlook is tied to expectations for rising capital expenditures among hyperscale technology companies. Citi forecasts hyperscaler spending will increase 84% this year, followed by 56% growth in 2027 and 38% growth in 2028. Amazon, Microsoft, Alphabet, Meta Platforms, and Oracle are expected to collectively spend more than $1.1 trillion in 2027, up from roughly $650 billion this year.
Malik also highlighted growing demand for NAND flash memory as an additional catalyst for chip equipment makers. “The rise of agentic AI is driving a structural increase in NAND demand as memory requirements surge and DRAM supply tightens,” the analyst said. Alongside the Applied Materials upgrade, Citi raised its price targets on Lam Research to $450 from $315 and on KLA to $290 from $206.40 while maintaining Buy ratings on both stocks.
Smart Glasses Push Expands Growth Opportunities
Applied Materials also received a boost after unveiling SENZ, an integrated ambient visual platform designed for next-generation AI-powered smart glasses. The platform combines waveguide optics, sensing technology, vision correction, electronic dimming, and a light engine into a single system. The company announced several partnerships tied to the initiative, including a manufacturing collaboration with GlobalFoundries using its Singapore fabrication facility and a compute integration partnership with Qualcomm. Applied Materials also entered a long-term joint development agreement with EssilorLuxottica focused on commercializing augmented reality and AI-enabled eyewear. The announcements signaled a potential expansion beyond Applied Materials' traditional semiconductor equipment business into emerging AI hardware markets.
Strong Fundamentals Support Investor Optimism
The latest developments come on top of strong financial performance from the company. Applied Materials recently reported record fiscal second-quarter 2026 revenue of $7.9 billion and earnings per share of $2.86, exceeding analyst expectations. Management also raised its outlook for semiconductor equipment growth in 2026, increasing its forecast from more than 20% growth to more than 30%. As a result, Applied Materials' gains were largely driven by company-specific developments, analyst upgrades, and continued optimism surrounding AI-related semiconductor spending. The move underscores investors' growing confidence that Applied Materials and its peers remain positioned to benefit from the next phase of AI infrastructure expansion.
For broader context, the AI-driven chip demand boom has also lifted other tech stocks. For instance, Microsoft Stock Gains 2% as Evercore Lifts Target, Analysts Eye AI Capex and ASML Lifts 2026 Revenue Forecast by 16% as AI Chip Demand Drives Capacity Expansion. Meanwhile, AMD Drops 6% Amid Chip Selloff, Yet Analysts Raise Targets on AI Demand shows the sector's volatility.
This article is for informational purposes only and does not constitute financial advice.
