Concerns about AI investment returns cannot hold back the semiconductor equipment wave! Jefferies remains firmly bullish: industry growth is expected to continue through 2028.

Investment bank Jefferies Financial Group Inc. expects the semiconductor equipment market to continue expanding through 2028, even as market concerns about artificial intelligence (AI) investment, data center construction, and memory chip prices are putting pressure on the semiconductor industry. Semiconductor companies and semiconductor equipment manufacturers showed improved optimism about business fundamentals when reporting their latest quarterly results. At the same time, however, growing stock market concerns about future risks have further widened the gap between current performance and share price expectations. The market has been worried about the sustainability of capital expenditure by hyperscalers, power supply constraints and delays in data center construction, financial links among major AI companies, and elevated memory chip prices. Questions about returns on generative AI investment, as well as the risks posed by increasingly autonomous AI systems, have also resurfaced. However, Jefferies Financial Group Inc. expects continued adoption of AI applications to support demand for graphics processing units (GPUs), custom chips, central processing units (CPUs), power semiconductors, and other components used in data centers. The bank also expects memory chip demand to continue growing. Long-term supply agreements between semiconductor companies and customers have improved visibility into medium-term demand and support equipment makers' expectations for industry growth to continue through 2028. Jefferies Financial Group Inc. expects the wafer fabrication equipment market to reach up to US$200 billion by 2027 and about US$220 billion in 2028, though both figures may fall short of investor expectations of US$200 billion and US$250 billion, respectively. Even so, the market should still maintain strong growth through 2028. On individual stocks, Jefferies Financial Group Inc. rates Applied Materials (AMAT.US), Lam Research (LRCX.US), NVIDIA Corporation (NVDA.US), CoreWeave (CRWV.US), Meta (META.US), Microsoft Corporation (MSFT.US), and Amazon.com, Inc. (AMZN.US) as "Buy." The bank rates ASML Holding NV ADR (ASML.US) and SCREEN Holdings (DINRF.US) as "Hold."