Applied Materials was upgraded to "Outperform" from "Neutral" by Mizuho on Wednesday, as the firm pointed to a sharp recovery in capital spending on semiconductors and improved demand across foundry and logic customers.
Analyst Vijay Rakesh raised the price target for the stock to $370 from $275, stating that the company is poised to benefit from a "significant acceleration" in spending on wafer fab equipment (WFE) through 2027.
Mizuho expects WFE growth of 13% year-over-year in 2026, followed by another 12% in 2027, which represents "a significant acceleration compared to our previous expectations."
With nearly 65% of revenues tied to foundry and logic customers, Rakesh pointed to increased capital expenditures from TSMC and improved spending on tools at Intel as key drivers of growth.
TSMC's capital expenditures are expected to be "much higher" between 2026 and 2028 than they were in the 2023-25 period, with spending expected to increase by 32% to $54 billion in 2026 alone.
Demand for memory is also expected to provide support. Rakesh noted that DRAM memory associated with high bandwidth memory (HBM) should remain strong, representing about 30% of Applied Materials' revenue base.
While China remains a burden, with the company's revenues from China expected to decline by 4% this year, the analyst said the rest of the world - about 70% of sales - is accelerating at a faster pace. He added that AI-driven investment is pushing advanced development in the sub-2nm node.
Rakesh stated that the broader rise in global spending on WFE creates "strong tailwinds for all WFE suppliers," supporting his upgrade and higher estimates for 2026 and 2027.