Wells Fargo Shows Strong Interest in These Two Semiconductor Companies

Wells Fargo Sees More Upside for Semiconductor Stocks

Wells Fargo anticipates that the semiconductor sector still has room to run, forecasting further substantial gains ahead. On Thursday, the firm shifted its ratings for KLA Corp (KLAC) and Lam Research (LRCX) from "Overweight" to "Equal Weight," prompting a swift positive response in both stocks. Applied Materials (AMAT) remains Wells Fargo’s preferred choice, and it too experienced an uptick alongside the other two companies.

Although Wells Fargo noted that semiconductor capital equipment stocks have become a popular investment and have already outperformed so far this year, the firm maintains a positive outlook. They expect ongoing demand trends to result in tighter supply and demand conditions for both logic and memory, supporting continued growth in wafer fabrication equipment (WFE) through 2027. This perspective is in line with the broader consensus among analysts.

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For example, Stifel projects that WFE expenditures will climb by 10% to 15% in 2026, translating to a year-over-year increase of $10 billion to $15 billion, largely driven by advancements in foundry, logic, and DRAM technologies.

Let’s examine these stocks more closely to understand Wells Fargo’s enthusiasm and their updated price targets.

KLA (KLAC)

KLA Corporation specializes in producing semiconductors and electronic components, including integrated circuits, wafers, and printed circuit boards. The surge in artificial intelligence applications has fueled strong demand for these products. Wells Fargo’s upgrade reflects confidence in KLA’s ability to capitalize on increasing process complexity. The firm expects KLA to maintain its leadership in WFE performance, particularly as the industry moves toward two-nanometer chip production. Manufacturing at this scale demands exceptional precision, making KLA’s solutions especially valuable. The company stands to benefit not only from increased equipment installations but also from customers’ growing focus on process control to enhance yields.

Wells Fargo reinforced its positive stance by raising KLA’s price target to $1,600, up from $1,250. The firm also increased its WFE growth estimate by roughly 10% and raised its forecasts for 2026 and 2027 above the prevailing market outlook.

Despite these optimistic projections, the average analyst price target for KLA remains at $1,379.52, indicating that many analysts have yet to catch up with Wells Fargo’s view.

Lam Research (LRCX)

Lam Research provides advanced wafer fabrication equipment to the semiconductor industry, collaborating closely with leading memory manufacturers to produce memory cells and intricate wiring. This partnership is a key reason for Wells Fargo’s positive outlook on the company.

Anyone following the consumer PC market will have noticed the dramatic rise in memory prices, especially for RAM, which has seen prices soar several times over.

Wells Fargo expects Lam Research to benefit from sustained high demand for memory, with shortages likely to persist through 2026. Strong sales of NAND flash memory are also contributing to the company’s outperformance.

Lam Research plays a crucial role in chip production, particularly during process upgrades and transitions, even when the industry isn’t constructing new fabrication plants. In other words, as the memory market evolves through technological improvements, Lam is well-positioned to capture increased equipment demand.

Wells Fargo also significantly boosted Lam’s price target, raising it to $250 from $145. This move reflects the firm’s belief that equipment demand could surpass consensus expectations over the next few years.

However, the average analyst price target for Lam Research is still much lower, at $183.38, showing a more cautious stance among other analysts.