Citi Boosts Semi Stocks: AI Fuels Memory Demand Surge

Citi has significantly raised price targets for semiconductor equipment leaders Applied Materials, Lam Research, and KLA. This comes from a very positive outlook on NAND equipment demand. Applied Materials stock rose about 4% in pre-market trading, with KLA and Lam Research gaining over 3%. Here's the thing: Citi analysts see the widening DRAM supply gap accelerating the use of complementary storage solutions. The firm projects the global wafer fab equipment market could reach $250 billion in 2028. What's interesting is that the rise of agentic artificial intelligence is driving a "structural growth" in NAND demand. This is because total memory demand now exceeds what high-cost HBM and DRAM can efficiently support. This shortfall highlights a growing imbalance between memory supply and demand. Companies are now adopting solutions like key-value cache offloading. This relies on high-performance NAND for scaling capacity and controlling costs in complex AI workloads. The bottom line: Citi has introduced earnings forecasts for these companies for 2028, based on strong projected profitability. Applied Materials' target price went from $550 to $710. Lam Research's target increased from $315 to $450. KLA's target rose substantially from $206.4 to $290. This news impacts investors and anyone tracking the semiconductor industry.