Memory Stocks Are Surging. Here’s Why Analysts Say the Run Isn’t Over

TLDR

• UBS analyst says the wafer fab equipment (WFE) industry may be entering a supercycle, with revenue potentially hitting $250 billion by 2028
• Micron, Samsung, and SK Hynix are opening new chip fabs, easing cleanroom space shortages
• Mizuho raised its price target for Sandisk to $2,200, and lifted targets for Seagate and Western Digital
• DRAM demand is projected to grow 27% year-over-year in 2026, driven largely by AI applications
• Google TPU shipments are forecast to exceed 35 million units by 2028, up from around 4.3 million in 2026

Memory chip makers are expanding production at a rapid pace, and analysts at two major investment banks say AI demand is the reason why.

UBS analyst Timothy Arcuri said this week that the wafer fab equipment industry — the sector that makes the machines used to build chips — could be entering the early stages of a supercycle. He projects total WFE revenue could reach $250 billion by 2028.

Arcuri expects WFE revenue to grow 27% this year to $147 billion. He sees it climbing a further 35% in 2027 to around $200 billion.

A key driver is new fab capacity coming online. Micron, Samsung, and SK Hynix are all starting operations at new fabrication sites. This is helping ease a shortage of cleanroom space, where chips are manufactured.

Micron Technology, Inc., MU

Customers are now sharing up to eight quarters of demand visibility with equipment suppliers. Arcuri said this level of forward planning is something he has not seen in nearly 30 years of covering the industry.

DRAM and NAND Equipment Spending Jumps

Revenue from equipment used to make DRAM and NAND memory chips is expected to rise 50% this year. Equipment for logic chips, made by companies like Taiwan Semiconductor and Intel, is forecast to grow 12%.

UBS raised its memory WFE revenue estimate for next year by $10.5 billion. Much of the new capacity coming online is focused on DRAM, driven by long-term supply agreements. NAND capacity is expected to see a bigger share of new investment starting in the second half of 2028.

Arcuri said he prefers Lam Research and Applied Materials among equipment stocks. He views KLA as trading at a premium that leaves little room for upside. Shares of Applied Materials and KLA both rose Tuesday even as broader chip stocks declined.

ASML, the Dutch company that makes extreme ultraviolet lithography machines, is projected to generate more than $46 billion in systems revenue next year — a level Arcuri says supports his overall WFE forecast.

Mizuho Raises Targets Across Memory Sector

Separately, Mizuho Securities raised its price target for Sandisk to $2,200, up from $1,825, while keeping an Outperform rating. The firm also raised its target for Seagate to $1,090 from $875, and lifted Western Digital’s target to $685 from $550.

Mizuho analyst Vijay Rakesh projects DRAM consumption will grow 27% year-over-year in 2026 and 24% in 2027. NAND consumption is forecast to grow 18% in both years.

Google’s Tensor Processing Unit shipments are expected to top 35 million units by 2028, up from roughly 4.3 million in 2026. Broadcom, which is a key design partner for Google’s TPU and OpenAI’s upcoming chip, is expected to see AI-related revenue reach $122 billion in 2027 and $170 billion in 2028.

Sandisk began trading Monday at $1,982 and gained around 5.69% following the upgrade. Its price-to-earnings multiple currently stands at 58.32 times, well above its historical median of 29.61 times.

The PHLX Semiconductor Sector index is up 73% so far this year despite Tuesday’s slight pullback.

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