The semiconductor space has been pushing to fresh records, with the VanEck Semiconductor ETF hitting an all-time high — trading around 664 and change, up roughly 0.7% on the session. Within that broad strength, a clear theme has emerged over the last couple of weeks: capital appears to be rotating away from the large "big spender" chip buyers and into the bottlenecks of the supply chain — the semiconductor equipment makers. This is the segment that has shown a notable degree of outperformance recently, and it is precisely the area drawing renewed bullish attention.
The Bullish Equipment Note
A bullish research note on the semiconductor names singled out four equipment makers, raising price targets on each while maintaining existing overweight ratings. The common thread across all four was an expectation of continued positive "semi cap" (semiconductor capital equipment) results in the second quarter, framing the group as a bottleneck-infrastructure play heading into earnings season.
ASML
The price target on ASML was raised to 2,200, up from 1,750, with the overweight rating kept in place. The thesis is specifically that continued positive semi cap results will materialize in the second quarter. At the time, ASML was trading around 1,916 and was down slightly on the morning — the only one of the four names lower that day — but the new target still implies meaningful upside. Across the broader analyst community, roughly 72% of analysts covering ASML carry a buy rating. The average analyst price target sits around 1,720, which is actually below where the stock was currently trading.
Applied Materials (AMAT)
Applied Materials saw its price target lifted to 715, up from 520, with the stock trading around 626 at the time — leaving room for upside. The overweight rating was maintained, again on the expectation of continued positive second-quarter results. AMAT also carries roughly a 72% buy rating overall, with an average price target of about 572. As with ASML, that average target is a little below the current trading level, indicating the new, higher target is more optimistic than the consensus.
KLA Corporation (KLAC)
KLA was having a strong session, trading up about 3% on the day. The price target was raised and the overweight rating maintained, on the same outlook for strongly positive results and continued bullishness in the space. KLA is somewhat less universally loved than the first two names: about 62% of analysts covering it hold a buy rating — still a significant majority, just not quite as strong as the others. The average price target sits near $200, significantly below the then-current price of 267.85, within an analyst range of 150 to 290. The newly issued target of 305 establishes a new street high for the stock.
Lam Research (LRCX)
Lam Research was trading about 2% higher on the day, around 396.48. Its price target was raised to $450, up from 365, with the overweight rating already in place. On the sell-side, roughly 69% of analysts carry a buy rating, with an average price target of about 335.74 inside a range of 220 to 450. The $450 target ties the existing street high for the name.
In sum, three of the four names were higher on the day, with only ASML turning to the downside. The overarching takeaway is heavy bullish sentiment concentrated in this bottleneck-infrastructure corner of the chip trade as these companies head into earnings.
An Example Options Trade on KLA Corp
How would you approach an example trade on KLAC? The recommended stance is to approach it fairly aggressively. Following a recent stock split, KLAC is seen as a name where newer investors can now take a stab, since the previously very high share price had been a barrier — and the post-split price now makes it actually cheaper than its counterparts.
From a chart standpoint, KLAC is setting up a little better than its peers, Lam Research (LRCX) and Applied Materials (AMAT). While AMAT is generally the standout in the sector and all three trade very sympathetically with one another, KLAC specifically broke its 52-week highs on the day — exactly the technical signal being sought. This constitutes a technical breakout, and because KLAC had been playing catch-up to its peers, it may have more room for near-term acceleration to the upside than the other two.
The specific structure: looking at the July 17th expiration, the trade is to short the 255 put and go long the 242 put — a put spread — aiming to collect a credit of 520 or higher. Because the stock is trading at its highs, the position should not be allowed to move too deep against it; the plan is to risk 40%, while the believed exit value is around 80%. The breakout is seen as potentially carrying the stock closer to the $300 level. The day's action, in this view, showcases the demand in the name — especially newer demand unlocked by the lower, post-split price point relative to its higher-priced sector peers.
