Wells Fargo Sees WFE Reaching $100B in 2025, Applied Materials (AMAT) and ASML Holdings (ASML) Top Picks

Wells Fargo analyst Aaron Rakers reiterated Overweight ratings on Applied Materials (NASDAQ: AMAT) and ASML Holdings (NASDAQ: ASML) on the belief that WFE has the potential to reach $100B in 2025, up from $75B+ in '21. In order to reach this level of market size, the analyst sees 4 requirements:

1) Total semi revenue growth of 8% 2020-2025 CAGR (+6% ex-memory). The analyst currently estimates non-memory semi units shipped growing at a 6.5% CAGR, with DRAM and NAND Flash bit supply growing at 18% and 26% CAGRs.

2) Wafer capacity growth of 5% CAGR 2020-2025,inclusive of memory growth at a ~7% CAGR and non-memory (Foundry / Logic &Other) at ~4%.

3) Capital Intensity to remain a positive tailwind for semi cap companies going forward. Average capital intensity is currently estimated in the 14%-15% range.

4) Spending Cyclicality Persists. While underlying secular trends driving the need for semi cap equip continue to be positive, this industry should remain cyclical with WFE declining in the mid-single digit range in 2023.

The analyst stated "Although the timing of semi cycles will remain difficult to predict, and the path to $100B WFE is not likely a straight line (we est. 2023 WFE, MSD% y/y), our analysis leaves us to consider this level as achievable as early as the 2025 time frame. From a company perspective, while we continue to prefer ASML and AMAT as our top semi cap picks,"

For an analyst ratings summary and ratings history on Applied Materials click here. For more ratings news on Applied Materials click here.

Shares of Applied Materials closed at $139.01 yesterday.

You May Also Be Interested In

• Cantor Fitzgerald Reiterates Overweight Rating on Applied Materials (AMAT)
• JD.com (JD) Reiterated at Buy by Benchmark Amid Earnings Recovery
• Fiserv (FISV) PT Lowered to $60 at Freedom Broker