Mizuho analysts told investors in a note Friday to watch semiconductor capital (semi-cap) equipment stocks due to the talk of more investment in artificial intelligence.
Analysts explained that while the euphoria over anything AI and semi-related gains momentum by the day, they would watch price action in the semi-cap equipment stocks today and in the near term, highlighting Applied Materials (NASDAQ:AMAT), Lam Research (NASDAQ:LRCX), KLA Corporation (KLAC), and ASML Holdings (ASML).
"These are some of the higher beta names in semis, and a few things to me could be catalysts for a further break-out to all-time highs," they wrote.
The note follows a report by The Wall Street Journal today that Open AI founder Sam Altman is in talks to potentially raise "trillions of dollars to fund chips for AI."
"Who knows what this fully entails in terms of the supply chain and [manufacturing] capacity, but sounds like he aims for more regionalized capacity globally targeting high-performance silicon. That would maybe be bad for leader NVDA, but very good for any leading edge and packaging [equipment] supplier as well as foundry," the analysts wrote.
They also noted that the US Department of Commerce will soon officially release the US Chips Act funding awards, and it "could catalyze semi-cap eqpt stocks that will be supplying all the production and inspection tools for the added fab capacity."
"It is well-known, but seeing the awards could bring new money into these stocks," added the analysts, who state that ASML is their favored long, but they would also look to AMAT and LRCX for near-term upside.