Citi updated its WFE forecast and raised price targets for the three leading semiconductor equipment suppliers, lifting Applied Materials to $710 from $550, Lam Research to $450 from $315 and KLA Corporation to $290 from $206.40. The firm said it aligned its estimates for all three names to a revised wafer fab equipment model and rolled forward price targets using calendar year 2028 earnings power.
In its refreshed outlook, Citi published bull-case WFE spending of roughly $145 billion in 2026, $200 billion in 2027 and $250 billion in 2028 - the first time the bank has published a 2028 forecast. Those figures rest on an updated hyperscaler capital expenditure model that assumes growth of 84%, 56% and 38% in 2026, 2027 and 2028, respectively.
The bank said it has become "more constructive on 2028 WFE given continued capacity constraints and expansion at both TSMC and memory makers, as well as recent progress at Intel and Samsung foundries," and noted that the 2028 projection implies 25% growth over the prior year.
Citi also highlighted structural demand shifts tied to the rise of agentic artificial intelligence. The firm argued that agentic AI is increasing NAND demand while DRAM supply tightens, creating a widening gap between memory requirements and available capacity.
Specifically, Citi argued that multi-step inference workflows are expanding the footprint of KV cache - the intermediate memory state used in AI models - "well beyond what high-cost HBM and DRAM can efficiently support," particularly given constrained DRAM supply and elevated pricing. As a concrete example of the strain, the bank cited a report that Nvidia reduced SoCAMM2 DRAM capacity in its Vera Rubin NVL72 systems by roughly 50% due to supply limitations and cost considerations.
"This underscores a widening gap between required and available memory, and we are seeing companies accelerating the adoption of complementary solutions as a result, such as KV cache offloading where intermediate model state is shifted to lower-cost, higher-capacity storage tiers," Citi wrote.
To close the capacity shortfall, Citi estimated the industry would need meaningful new NAND manufacturing capacity. The bank used an assumption that a modern 150,000 wafers-per-month NAND fab can produce about 15 exabytes of capacity annually. Based on that metric, Citi calculated the sector needs two to four new greenfield fabs to address the bottleneck.
Those hypothetical fabs would represent $20 billion to $40 billion in total capital expenditure, or $15 billion to $30 billion in NAND-specific wafer fab equipment spending, according to Citi's estimates. The bank folded those assumptions into its updated WFE model and into the revised price targets for the three equipment suppliers.
The move to base price targets on a 2028 earnings power horizon and the materially larger WFE assumptions reflect Citi's view that foundry and memory capacity expansion, together with changes in memory architecture prompted by AI workloads, will drive elevated equipment demand over the next several years.
Context for markets and supply chains
From a capital allocation perspective, the higher WFE outlook implies greater near- to medium-term demand for semiconductor manufacturing tools and related services. For logistics and supply-chain observers, sustained WFE growth would translate into elevated equipment shipments, installation projects and ongoing aftermarket service activity tied to wafer fabs and memory production lines.
Analysts and investors monitoring volume/price mix, equipment lead times and the cadence of hyperscaler capex will watch the sector closely to see whether the projected 2026-2028 spending trajectory materializes.