Bank of America has laid out its top picks in the semiconductor capital equipment sector as it anticipates an accelerating market for wafer fabrication equipment. The bank expects wafer fabrication equipment to expand at about a 20% compound annual growth rate, driven by memory investments, cleanroom additions and rising leading logic intensity.
The bank highlighted three firms with differentiated market positions and growth profiles: Applied Materials, Inc. (AMAT), MKS Instruments (MKSI) and Lam Research Corp. (LRCX). For each company, BofA provided a price objective anchored to specific valuation multiples and detailed the factors supporting those targets, along with material downside considerations.
Applied Materials (AMAT)
Bank of America assigned a $420 price objective to Applied Materials, using 29 times the firm’s calendar year 2027 price-to-earnings estimate as the basis. That multiple places the price objective near the high end of AMAT’s historical 10-30 times trading band, a level the bank says is justifiable if wafer fabrication equipment demand outpaces expectations in 2026 and 2027.
The bank notes that Applied Materials trades at a discount to larger peers because it presents a more balanced growth profile and lower profitability. BofA flagged a U.S. government probe as a downside risk it cannot currently quantify.
Operationally, Applied Materials has introduced two new chipmaking systems intended for production at 2nm and smaller process nodes. Separately, Wolfe Research raised its price target on Applied Materials, citing the company’s strong competitive position in DRAM. Applied Materials itself expects DRAM to be its fastest-growing segment in 2026.
MKS Instruments (MKSI)
For MKS Instruments, BofA established a $300 price objective based on 19 times calendar year 2027 enterprise value-to-EBITDA. That valuation basis sits below a roughly 25 times peer median, with the bank pointing to a trade-off between MKSI’s relatively higher margins and its higher leverage plus broader non-semiconductor exposure.
BofA highlighted several risks for MKSI, including the cyclical nature of semiconductor capital spending, the potential for expanding China export restrictions to affect equipment customers, and an above-average debt profile following the company’s acquisition of Atotech.
Supporting the company’s outlook, MKS provided first-quarter revenue guidance that topped expectations. In response to the guidance, Needham raised its price target, and Cantor Fitzgerald also increased its price target, citing MKSI’s long-term growth potential across semiconductor and packaging businesses.
Lam Research (LRCX)
Bank of America set a $285 price objective for Lam Research, based on 41 times calendar year 2027 price-to-earnings. That multiple is above the upper end of Lam’s historical 9-40 times trading range. BofA supports the valuation with a backdrop of an ongoing memory and leading-edge foundry/logic wafer fabrication equipment cycle, expectations for a high-teens earnings-per-share compound annual growth rate over time, and Lam’s leadership in etch and deposition products.
Other factors the bank cites include rising etch/deposition intensity, the potential for share gains, increasing foundry/logic exposure relative to memory, improving NAND recovery prospects and robust free cash flow generation. Near-term headwinds the bank identified include cost inflation and tariffs.
Lam Research recently reported fiscal third-quarter results that topped estimates and issued strong guidance for the fourth quarter. Following that performance, several firms, including Stifel, TD Cowen and RBC Capital, raised their price targets on the stock. BofA listed upside scenarios such as technology inflections, foundry/logic share gains and NAND spending upgrades, while noting downside risks like slower capital-spending cycles and potential market share losses.
Takeaway
Bank of America’s analysis frames wafer fabrication equipment as the primary beneficiary of near-term semiconductor capital spending, with memory investments and leading-edge logic intensity identified as key growth drivers. The three named equipment suppliers carry differing valuation anchors and risk profiles: Applied Materials with a P/E-based target and an ongoing regulatory probe; MKS Instruments with an EV/EBITDA multiple and a leveraged balance sheet after an acquisition; and Lam Research with a higher P/E multiple justified by product leadership and a strong earnings-growth outlook.
The bank’s views have prompted a series of analyst price-target increases across the group, reflecting both company-level execution and the broader equipment cycle narrative. Yet BofA’s write-ups also underscore familiar sector risks, including cyclical capital spending, geopolitical and trade-related restrictions, cost pressures and potential market-share shifts.