Investing.com — Shares of semiconductor equipment companies, including Nova Measuring (NASDAQ:) Instruments (NASDAQ: NVMI), Veeco Instruments (NASDAQ: NASDAQ:), MKS Instruments (NASDAQ: NASDAQ:), Advanced Energy Industries (NASDAQ: NASDAQ:), and FormFactor (NASDAQ: NASDAQ:), have witnessed a significant uptick in today’s trading session. Nova Measuring Instruments’ stock rose 7%, Veeco Instruments’ and MKS Instruments’ shares also jumped 7%, while Advanced Energy Industries and FormFactor saw increases of 3.5% and 5%, respectively.
The upward movement in these stocks follows a series of upgrades by analysts at Citi. The companies have been facing a challenging environment due to a combination of factors, including a correction in the second half of 2024, weaker consumer memory demand, and additional U.S. restrictions impacting China’s domestic spending. Despite these headwinds, analysts believe that the risk-reward is now skewed to the upside, with the stocks trading closer to historically attractive price-to-earnings levels and at a discount to broader market indices.
“We go all in and upgrade NVMI, VECO, MKSI, AEIS, and FORM,” stated analyst Atif Malik, indicating a positive shift in sentiment towards these companies. This bullish stance is supported by the expectation that key performance indicators such as estimate revisions and memory pricing momentum are likely to bottom out in the first half of 2025. Furthermore, continued investments in AI are expected to provide tailwinds for the sector.
The broader outlook for the semiconductor equipment industry remains cautious, with expectations for the capital expenditures (capex) in the industry to decline by 5% year-over-year (YoY) in 2025. Analysts anticipate that leading-edge AI investments will be fully offset by weaker demand in mature logic industrial and automotive sectors, as well as a decline in China’s domestic spending. For memory, a decrease in DRAM spending by 23% is expected, counterbalanced by investments in High Bandwidth (NASDAQ:) Memory (HBM), while NAND spending is projected to remain flat due to delayed technology migrations.
Looking ahead, analysts expect semiconductor equipment makers to lower their previous growth expectations for the industry in January, following a warning from Micron (NASDAQ:) about cuts in NAND capex. This recalibration is seen as a clearing event for the sector, with the replenishment of PC DRAM inventory and the bottoming out of DRAM prices in the second quarter of 2025 as the next major catalysts.
Among the smaller to mid-sized companies, Nova Measuring Instruments is favored for its broad metrology products portfolio and diversified exposure across leading foundry, logic, and HBM customers. Veeco Instruments is recognized for its share gains in laser and nanosecond annealing, positioning these companies well for potential growth opportunities in 2025.
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