Barclays Raises Price Targets for Applied Materials and KLA as AI Capex Drives Equipment Market Expansion
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Barclays sharply raised price targets on three major chip-equipment stocks, projecting the wafer-fab equipment market will swell to $209.5 billion by 2027 — over 30% above its prior forecast. This means equipment makers are positioned at the start of a rare expansion cycle driven by AI capital spending.
What exactly did Barclays change?
Barclays reiterated Overweight ratings on Applied Materials (AMAT) and KLA Corp. (KLAC), lifting targets from $500 to $590 and from $1,700 to $2,250, respectively.
Lam Research (LRCX) stays at Equal Weight, but its target still rose from $275 to $335.
This means → Barclays is more bullish on the entire equipment chain — the only distinction is conviction level: AMAT and KLA are top picks, while Lam Research is a "rises with the tide but doesn't lead it" call.
Is the market buying it?
All three stocks rallied pre-market: AMAT up 4.7% to $520.15, KLA up 3.9% to $2,218.69, LRCX up 4.6% to $336.72.
Year-to-date, each has gained more than 75%.
In plain terms = the market isn't just voting on this upgrade — it's pricing in the entire AI equipment cycle. A 75% run this year shows capital was already front-running.
How does AI drive the equipment market?
Barclays analyst Tom O'Malley distilled the thesis into one line: "The capex cycle is broadly and materially stronger than expected."
The bank raised its wafer-fab equipment (WFE — the full suite of machines needed to produce chips) market forecast from $139 billion to $154 billion, and projects a further 36% expansion to $209.5 billion by 2027, well above its prior $159 billion estimate.
This means → it is not one customer spending more — the entire industry's capex waterline has been lifted by AI demand, collectively raising the revenue ceiling for equipment makers.
Who is spending on equipment?
Memory side: Micron, SK Hynix, and Samsung are ramping investment in memory chips (HBM and related), delivering significant incremental orders to equipment vendors.
Logic side: TSMC, Intel, and other AI chip manufacturers face tight supply and surging demand, driving equally strong capex expansion.
In plain terms = memory and logic are expanding capacity simultaneously — equipment makers' order books are powered by two engines, not one. That dual driver is what gives Barclays the confidence to raise forecasts this aggressively.
Can this forecast actually deliver?
Barclays itself acknowledges the $209.5 billion 2027 figure hinges on two prerequisites: the AI compute investment cycle does not stall, and major fabs' expansion timelines stay on track.
This reflects a key uncertainty: the current forecast is built on the assumption that AI capex only goes up — if downstream demand softens or fabs delay expansion, the equipment market's growth trajectory flattens materially.
Put simply = Barclays is sketching the best-case scenario — investors need to judge for themselves whether those two prerequisites hold.
Content is for reference only, not financial advice.