US Semiconductor Equipment_ Big Three Capex Preview

Industry Overview * Global WFE Spend: The global wafer fabrication equipment (WFE) spend is expected to reach $95 billion in 2025, a decrease of 5% year-over-year. This is primarily driven by a decline in mature logic and industrial/auto demand, offset partially by leading-edge AI investments and HBM investments in DRAM. * Market Segmentation: The WFE market is segmented into logic (foundry + IDM) and memory. Logic is expected to grow by 13% year-over-year, while memory is expected to decline by 38%. * Key Players: The "Big Three" (TSMC, Samsung, and Intel) account for approximately 65% of the global WFE spend. TSMC is expected to be the largest spender, followed by Samsung and Intel. TSMC * 2025 CapEx: TSMC's 2025 capital expenditure (CapEx) is expected to be higher than $40 billion, slightly higher than the Street's consensus of $35-$38 billion. * Growth Drivers: TSMC's CapEx is expected to increase throughout the year due to improving non-AI semiconductor demand. * Valuation: Citi's target price for TSMC is NT$1,540, based on a 23x multiple of its 2025-26E average earnings per share (EPS). Samsung * 2025 CapEx: Samsung's 2025 CapEx is expected to be similar to 2024, with a flexible approach to managing it. * Valuation: Citi's 12-month target price for Samsung is W83,000, based on a sum-of-the-parts (SOTP) methodology. Intel * 2025 CapEx: Intel's 2025 CapEx is expected to be $20-$23 billion, lower than the Street's consensus of $24 billion. * Risks: Intel faces risks related to PC end-market demand, competition, customer risk, and macroeconomic conditions. * Valuation: Citi's target price for Intel is $22.00, based on a 26x multiple of its 2025 estimated EPS. Other Key Points * KLA Corp: Citi has a Buy rating on KLA Corp, with a target price of $832 based on a 30x multiple of its 2025E earnings. * Nova Ltd: Citi has a Buy rating on Nova Ltd, with a target price of $240 based on a 31x multiple of its CY26 EPS. * Overall Rating: Citi has a Buy rating on the semiconductor equipment industry, with a focus on large cap and SMID cap names such as KLAC and NVMI.