Mizuho on Wednesday upgraded Applied Materials to Outperform from Neutral and increased its price target on the stock to $370 from $275, arguing that the company stands to benefit from a pronounced recovery in semiconductor capital investment.
Analyst Vijay Rakesh said the firm expects a “significant acceleration” in wafer fab equipment (WFE) spending through 2027, and lifted Mizuho's forecasts accordingly. The bank now models global WFE rising 13 percent year over year in 2026 followed by another 12 percent gain in 2027 - a revision the firm described as a meaningful acceleration relative to its previous outlook.
The note highlights two primary demand drivers for Applied Materials. First, foundry and logic customers account for roughly 65 percent of the company's revenue, making the group a central beneficiary of rising capex at leading manufacturers. Second, demand for DRAM tied to high-bandwidth memory is expected to provide additional support, contributing about 30 percent of AMAT's revenue base.
Mizuho pointed to rising capital expenditure at Taiwan Semiconductor Manufacturing Co. as a particular catalyst. The bank projects TSMC's capex for 2026 to 2028 will be significantly higher than spending in the 2023-25 period, with 2026 outlays alone expected to jump 32 percent to $54 billion. Improved tool spending at Intel was also cited as strengthening AMAT's near-term demand outlook.
While Mizuho acknowledged that China remains a headwind, the firm expects AMAT's China revenue to decline 4 percent this year and noted that markets outside China - which represent about 70 percent of the company's revenue - are accelerating more rapidly. The bank also described strong AI-related demand as driving leading-edge investment in nodes below 2 nanometers, further underpinning WFE growth.
Overall, Mizuho said the pickup in global WFE creates broad tailwinds for suppliers of wafer fab equipment and justified its upgrade and higher estimates for the 2026-27 period. The firm's revised forecasts and higher price target reflect that view.
Key points
- Mizuho upgraded AMAT to Outperform and raised the price target to $370 from $275.
- The bank now expects WFE to grow 13% in 2026 and 12% in 2027, a sharp acceleration from prior expectations.
- Foundry/logic customers (about 65% of revenue), rising TSMC capex and improving Intel tool spending are cited as primary tailwinds; DRAM tied to HBM accounts for roughly 30% of revenue.
Risks and uncertainties
- China remains a headwind - Mizuho forecasts AMAT's China revenue will fall 4% this year, which could weigh on overall results if the decline is larger or more prolonged.
- The outlook depends on sustained higher capex from major foundries and logic customers; if TSMC or Intel scale back spending, WFE growth could disappoint.
- WFE projections for 2026-27 represent a significant acceleration versus prior expectations, so execution risk and timing of orders could affect supplier revenues and margins.
These developments will be watched closely by investors tracking the semiconductor equipment supply chain and by market participants focused on capital expenditure cycles at major foundries and logic manufacturers.