Applied Materials surges as Citi lifts target on AI demand boom

Applied Materials AMAT shares surged on Wednesday after Citi raised its price target on the semiconductor equipment maker, citing accelerating artificial intelligence spending and growing demand for memory-related chip manufacturing equipment.

The stock jumped 9.7% during trading and reached a new 52-week high of $623.35.

The rally came after Citi increased its price target on Applied Materials to $710 from $550 while maintaining a Buy rating.

The gains also lifted other semiconductor equipment makers.

Lam Research rose more than 5%, while KLA Corp. advanced nearly 3% after Citi raised its targets on those companies as well.

Citi sees strong growth in chip equipment spending

Citi analyst Atif Malik argued that major technology companies continue to increase spending on AI infrastructure, creating a favorable backdrop for semiconductor equipment suppliers.

Applied Materials, Lam Research, and KLA manufacture wafer fabrication equipment used to convert silicon wafers into semiconductors.

According to Citi, the global wafer fab equipment market could experience significant growth over the next several years.

The bank estimates the market is worth approximately US$145 billion (approx. $187.1 billion) this year and projects it could reach US$200 billion (approx. $258 billion) in 2027 and US$250 billion (approx. $322.5 billion) in 2028.

The outlook is tied to expectations for rising capital expenditures among hyperscale technology companies.

Citi forecasts hyperscaler spending will increase 84% this year, followed by 56% growth in 2027 and 38% growth in 2028.

Amazon, Microsoft, Alphabet, Meta Platforms, and Oracle are expected to collectively spend more than US$1.1 trillion (approx. $1.4 trillion) in 2027, up from roughly US$650 billion (approx. $838.6 billion) this year.

Malik also highlighted growing demand for NAND flash memory as an additional catalyst for chip equipment makers.

“The rise of agentic AI is driving a structural increase in NAND demand as memory requirements surge and DRAM supply tightens,” the analyst said.

Alongside the Applied Materials upgrade, Citi raised its price targets on Lam Research to $450 from $315 and on KLA to $290 from $206.40 while maintaining Buy ratings on both stocks.

Smart glasses push expands growth opportunities

Applied Materials also received a boost after unveiling SENZ, an integrated ambient visual platform designed for next-generation AI-powered smart glasses.

The platform combines waveguide optics, sensing technology, vision correction, electronic dimming, and a light engine into a single system.

The company announced several partnerships tied to the initiative.

These include a manufacturing collaboration with GlobalFoundries using its Singapore fabrication facility and a compute integration partnership with Qualcomm.

Applied Materials also entered a long-term joint development agreement with EssilorLuxottica focused on commercializing augmented reality and AI-enabled eyewear.

The announcements signaled a potential expansion beyond Applied Materials' traditional semiconductor equipment business into emerging AI hardware markets.

Strong fundamentals support investor optimism

The latest developments come on top of strong financial performance from the company.

Applied Materials recently reported record fiscal second-quarter 2026 revenue of US$7.9 billion (approx. $10.2 billion) and earnings per share of $2.86, exceeding analyst expectations.

Management also raised its outlook for semiconductor equipment growth in 2026, increasing its forecast from more than 20% growth to more than 30%.

As a result, Applied Materials' gains were largely driven by company-specific developments, analyst upgrades, and continued optimism surrounding AI-related semiconductor spending.

The move underscores investors' growing confidence that Applied Materials and its peers remain positioned to benefit from the next phase of AI infrastructure expansion.