Semiconductor equipment vendors Applied Materials and Lam Research saw their shares rise Thursday after memory-chip maker Micron Technology forecast a sizable increase in capital spending in its next fiscal year, which starts in September.
Applied Materials and Lam Research get a larger share of revenue from memory-chip producers than their peers in the semiconductor equipment market.
Late Wednesday, Micron said it plans to ramp up capital expenditures to support demand for high-bandwidth memory and other advanced chips.
"We expect to increase our capital spending materially next year, with capex around mid-30s percentage range of revenue for fiscal 2025," Micron Chief Executive Sanjay Mehrotra said on a conference call with analysts. The heightened capex will support high-bandwidth memory assembly and test equipment as well as fabrication and packaging.
New Factories In Idaho, New York
In the current fiscal 2024, Micron plans to spend about $8 billion on capex on estimated revenue of $24.9 billion. The company said its wafer fab equipment (WFE) spending will be down on a year-over-year basis in fiscal 2024.
Micron's guidance implies fiscal 2025 capex of nearly $13 billion, up 60% from the fiscal 2024 level, TD Cowen analyst Krish Sankar said in a client note.
Micron's planned Idaho and New York greenfield fabs will account for half or more of the expected increase in capex next year, Mehrotra said.
"These fab construction investments are necessary to support supply growth for the latter half of this decade," he said. "This Idaho fab will not contribute to meaningful bit supply until fiscal 2027, and the New York construction capex is not expected to contribute to bit supply growth until fiscal 2028 or later."
He added, "The timing of future WFE spend in these fabs will be managed to align supply growth with expected demand growth."
Applied Materials, Lam Research Are Tech Leaders
Shares of Applied Materials and Lam Research rose on the news.
On the stock market today, Applied Materials stock climbed 0.2% to close at 232.53. Lam Research stock advanced a fraction to close at 1,055.83.
Meanwhile, semiconductor equipment giant ASML saw its stock rise 1.1% to 1,028.01 on Thursday.
BofA Securities analyst Vivek Arya called out Camtek as another likely winner from Micron's increased capex. Camtek stock jumped 4.9% to 123.50 on Thursday.
Applied Materials, ASML, Camtek and Lam Research are on the IBD Tech Leaders list.
IBD's Semiconductor Equipment industry group ranks a lofty seventh out of 197 groups that IBD tracks. IBD trading guidelines recommend focusing on top-rated stocks in leading industry groups.
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