Jefferies Sees Semiconductor Equipment Growth Through 2028 Despite AI Investment Doubts

Jefferies expects the semiconductor production equipment market to keep expanding through 2028, even as concerns over AI investment, data-center construction and memory prices weigh on the sector. The firm noted that chipmakers and equipment vendors showed greater confidence in operating fundamentals in quarterly results for the period ended in September, while stock-market worries about future risks widened the gap between current performance and share-price expectations. Investor focus has centered on the sustainability of hyperscaler capital spending, power constraints and construction delays at data centers, financial ties among major AI players, and elevated memory prices. Questions over returns on generative AI investment and risks from increasingly autonomous AI systems have also resurfaced. Jefferies expects widening AI adoption to sustain demand for data-center GPUs, custom chips, CPUs, power semiconductors and other components, with memory demand also growing. Long-term supply agreements between chipmakers and customers improve medium-term visibility and support expectations for growth through 2028. Jefferies estimates the wafer fabrication equipment market at up to $200 billion in 2027 and about $220 billion in 2028, versus investor estimates of $200 billion and $250 billion, respectively, possibly somewhat conservative. The firm rates Applied Materials (AMAT), Lam Research (LRCX), Nvidia (NVDA), CoreWeave (CRWV), Meta (META), Microsoft (MSFT) and Amazon (AMZN) Buy, and ASML (ASML) and SCREEN Holdings (DINRF) Hold.