Shares of Applied Materials Inc (NASDAQ:AMAT, XETRA:AP2) climbed 3.8% on Tuesday afternoon after UBS upgraded the chip-equipment maker to Buy from Neutral, citing a strengthening memory recovery and raising its 12-month price target to $285 from $250.
UBS analysts said they now expect a “significantly more bullish outlook” for wafer fabrication equipment (WFE) in 2026 and 2027, driven largely by a surge in DRAM spending.
The bank forecasts WFE rising more than 20% next year to $136.5 billion, with DRAM investment contributing roughly $13 billion of the increase—more than half of the anticipated $25 billion jump in total WFE.
“AMAT stands out as the largest beneficiary of this DRAM spending surge,” the analysts wrote, adding that the company and broader market may be underestimating the strength of China’s equipment demand in 2026, which they view as “another source of upside and a meaningful tailwind.”
UBS now estimates Applied Materials’ 2027 earnings at about $13 per share, well above the Street’s $11.56 consensus, a gap the analysts say supports a “substantially higher share price” as the cycle strengthens.
While the firm acknowledged concerns around the company’s lost market share in China and potential threats to its physical vapor deposition (PVD) franchise, it called those issues “noise in such a strong upcycle,” noting AMAT’s high share of DRAM-related equipment demand.
UBS added that stronger mix, improved execution and renewed efforts in China should help the company regain share in 2026 and 2027.