Citi Bullish on Semiconductor Equipment Cycle Extending Through 2028, Raises Price Targets on All Three Equipment Giants
Miles Bennett
Citi issued its first 2028 wafer-fab equipment forecast, projecting the market could reach $250 billion in a bull case, and raised price targets on all three US equipment leaders — the core thesis is that AI-driven DRAM bottlenecks are redirecting capex toward NAND.
A $250 billion equipment market — where does the money come from?
Citi's bull-case WFE — wafer fabrication equipment, the full suite of machines needed to make chips — now stands at $145B / $200B / $250B for 2026 / 2027 / 2028.
The driver: hyperscaler capex keeps climbing, with Citi modeling year-on-year growth of 84%, 56%, and 38% across those three years.
This means → even as growth rates taper, absolute spending keeps swelling. Equipment makers have unusually strong order visibility for the next three years.
DRAM is running short — why does that help NAND?
The rise of agentic AI — AI systems that autonomously execute multi-step tasks — is ballooning KV cache demand (intermediate data generated during model inference), pushing total memory needs beyond what DRAM can efficiently handle.
Nvidia has already cut DRAM capacity in its next-gen Vera Rubin NVL72 system by roughly 50% on supply and cost grounds. Enterprises are instead offloading intermediate data to cheaper, higher-capacity NAND flash.
In plain terms = DRAM is too expensive and too scarce, so the industry is "downshifting" to NAND — not a step backward, but a practical architecture trade-off.
Citi estimates closing this gap requires 2–4 new NAND fabs, translating to $15B–$30B in equipment spending.
What signals confirm NAND demand is accelerating?
AMD acquired memory-optimization firm MEXT on June 15; Apple's AFM 3, unveiled June 8, adopts a new architecture that stores large models on NAND rather than DRAM.
SanDisk's HBF — a high-bandwidth flash product — moved its mass-production timeline forward by six months, with pilot production now set for H2 2026.
This reflects a shift across the entire chain, from chipmakers to consumer brands, actively preparing for NAND to absorb DRAM overflow — no longer just a concept.
How much did the three leaders' targets rise — and are they expensive?
Applied Materials (AMAT): target raised from $550 to $710, implying a 31× P/E on 2028 estimated EPS. Citi projects revenue growth of 30% and 22% in 2027 and 2028.
Lam Research (LRCX): target raised from $315 to $450 at a 40× multiple (up from 37×), reflecting its higher NAND exposure.
KLA Corp (KLAC): target raised from $206.40 to $290, also at 40×. All three hold Buy ratings with roughly 22%–25% upside.
This means → multiples are well above historical averages, yet Citi argues they remain below prior-cycle peaks — an AI-driven re-rating of the entire equipment sector is underway.
Content is for reference only, not financial advice.