Semiconductor capital equipment firms will benefit from the artificial intelligence megatrend next year as chipmakers upgrade their gear, a Wall Street analyst says. KLA stock and others rose Monday.
"AI has fundamentally changed semis, but there is still some distance between AI and semicap (except a handful of advanced packaging names)," Needham analyst Charles Shi said in a client note Monday.
"We believe 2026 is likely the inflection point, when general semicap (semiconductor capital equipment) will start to be the real AI beneficiary," he said.
The AI benefit will start with gear for making dynamic random access memory, or DRAM, chips next year and move to leading-edge foundries in 2027, Shi said.
Shi reiterated his buy ratings on chip gear makers Applied Materials, Entegris, KLA and Lam Research. He raised his price target on Applied Materials stock to 240 from 195, on KLA stock to 1,000 from 830, and on Lam stock to 110 from 80.
On the stock market today, Applied Materials stock rose 1.1% to close at 192.61. KLA stock advanced 0.7% to 937.76. Lam stock increased 1.1% to 101.74. And Entegris stock climbed 1% to 91.64.
"We think as the market comes to terms (with) 'semicap is AI beneficiary,' the rising tide should lift all boats," Shi said. "Nevertheless, we think the setup is the most favorable for AMAT from here."
KLA Stock Is A Recent Breakout
KLA stock is on four IBD lists: IBD 50, Big Cap 20, Long-Term Leaders and Tech Leaders.
Applied Materials and Lam Research also are on the IBD Tech Leaders list.
On June 17, KLA stock broke out of a 48-week consolidation pattern at a buy point of 896.32, according to IBD MarketSurge charts. But a two-day reversal that followed shook out many investors. KLA stock returned to the buy zone of its breakout on June 25.
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