Applied Materials (AMAT), AEI Industries (AEIS), and MKS (MKSI) were in focus on Friday as KeyBanc Capital Markets upped its price targets on the trio, noting that the semiconductor industry is poised for a strong 2026.
“We recently attended the SEMI Industry Strategy Symposium in San Francisco,” KeyBanc analysts wrote in a note to clients. “Our first takeaway is that it is now consensus that semiconductor sales will hit $1T this year, or next at the latest. Last year, the most bullish case was 2028 with consensus anchored on 2029-2030. The shift is understandable – seemingly limitless demand for GPUs driven by inexhaustible [data centers] budgets, the 2nm node transition, and memory pricing, which has doubled. These dynamics seem well reflected in share prices, but when the narrative shifts to Super Cycle, you have to be there. To be sure, we heard some obligatory cautionary tones, but essentially no one thought the music is about to stop.”
For AEI Industries, KeyBanc reiterated its Overweight rating and upped its price target to $280 from $240, as the surge in the share price over the past 9 months looks set to continue.
“While shares have seen a significant run since April, we think much of the performance has been driven directly by AE’s [data center] exposure, and we continue to see multiple other ways for AEIS to win in the next few years,” the analysts wrote. “In Semi, we have yet to see a material impact from new product introductions, which should solidify its RF positioning in conductor etch and could lead to share gains in dielectric over time. As such, we are increasing our 2027 and 2028 segment revenue estimates to 11% and 10%, respectively. The Industrial & Medical end market has been under pressure for multiple years, and a resurgence would not only add to top line but would benefit mix as well. Further, we remind investors that AEIS remains ‘on the hunt’ for an I&M acquisition, and we think the high end of its aspirational targets could add up to $500M sales and $1.25 EPS post-synergies. We also see AEIS’s operational strategy adding a continuing, gradual benefit to margins over time, with a [long-term gross margin] target of [more than] 43% from today’s high-30%s.”
The analysts also kept their Overweight rating on Applied Materials and upped their price target to $380 from $285, as the company has lagged its peers, KLA Corp. (LKAC) and Lam Research (LRCX).
“We think that more muted expansion is a function of AMAT’s higher exposure to trailing edge nodes for both China and [rest of world] customers,” the analysts wrote. “We understand that underperformance but note AMAT is the most diversified supplier and should benefit from increasing deposition and etch intensity as chip architecture at the leading edge (to eventually include DRAM) goes vertical. It is also the name most exposed to conventional DRAM, arguably the AI-related device facing the most scarcity, which we think at some point should translate into capacity expansion. We also expect AMAT’s Applied Global Services segment should post [low-double-digit] revenue growth in FY27-FY28 due to customers running the installed base of equipment at high utilization levels. While we acknowledge the front-end names generally perform as ‘one trade’, we think AMAT should screen better for new money given its relative valuation and integral position in enabling semiconductor manufacturing.”
The analysts also raised their price target on MKS, moving to $250 from $180 and kept their Overweight rating.
“We are not particularly concerned about MKS’s leverage given its FCF profile, and we like MKS’s broad sub-system exposure and think it should benefit from leading edge buildout over the next few years,” the analysts said. “Additionally, MKS power sources are incumbent on most NAND etch tools, meaning it should benefit from NAND upgrade spend even if greenfield capacity is not added in the [near-term]. In Advanced Packaging, we like MKS’s ‘drill & fill’ portfolio for PCBs and substrates, where technological advances are driving some of the most impactful benefits to power and performance in advanced chips, and also where there is little existing capacity to serve that market. We think these factors will combine to drive accelerating revenue and EPS growth fueled by cyclical recovery in semiconductor sales and secular growth in advanced packaging. Because of these factors, combined with its relatively lower multiple premium compared to the group, MKSI remains our preferred way to play this portion of the semicap upcycle.”