Applied Materials (AMAT) will be a major beneficiary of an upcoming surge in spending for dynamic random-access memory wafer fab equipment as the second largest supplier after ASML (ASML), UBS Securities said in a Monday note.

UBS analysts revised their projections for 2026 wafer fab equipment to rise over 20% to $136.5 billion, driven mainly by memory, with DRAM wafer fab equipment increasing by roughly $13 billion and accounting for more than half of the boost. This figure is anticipated to reach $145 billion in 2027, well above current Street expectations, the analysts said.

The analysts said the company and the broader industry is underestimating China's demand for the equipment in 2026, which will be another meaningful tailwind for Applied Materials.

With a better product mix, increased focus on China, and improved company expectations, Applied Materials should be able to regain some market share in the next two years, according to the note.

UBS upgraded the company's stock rating to buy from neutral and raised the price target to $285 from $250.

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