Morgan Stanley has revised upward its expectations for the semiconductor capital equipment cycle, lifting its wafer fab equipment (WFE) market forecasts for 2026 and 2027 and adding a new projection for 2028, while updating ratings on several major equipment suppliers.
In a note published on Monday, analyst Shane Brett said Morgan Stanley now anticipates the WFE market will reach $149 billion in 2026, a 27% increase versus prior comparable-year estimates, and $191 billion in 2027, a 28% year-on-year gain. The bank also introduced a 2028 forecast of $215 billion, implying a 13% rise from 2027.
The firm characterized the WFE cycle as having greater longevity than it previously expected. That view rests on two main pillars cited in the note: unresolved memory market imbalances and expanding demand for leading-edge logic chips. On memory, Morgan Stanley highlighted ongoing disequilibrium, noting specifically that for DRAM the supply/demand mismatch has not been settled.
At the same time, the bank singled out NAND as the segment poised for the fastest growth in 2027, forecasting a 52% year-on-year increase as greenfield investment accelerates. Morgan Stanley said it is increasingly positive on NAND-related WFE revisions from current levels, viewing the situation as part of a broader and longer investment cycle across semiconductor manufacturing equipment markets.
Beyond memory, structural drivers such as artificial intelligence workloads and central processing unit demand were also cited. The note referred to Intel-driven capital spending expansion and broader packaging growth trends, forecasting that packaging-related WFE will grow 41% compared with a 27% increase for overall WFE.
Against this backdrop, Morgan Stanley adjusted its coverage and ratings. The firm upgraded Lam Research to Overweight from Equal-weight and increased its price target to $331 from $293. It downgraded Applied Materials to Equal-weight from Overweight. Separately, Morgan Stanley identified MKS as its top pick, pointing to what it described as improved exposure to potential NAND upside.
Overall, the firm's revised forecasts and repositioned recommendations reflect a view that semiconductor equipment investment is broadening across technology segments and extending in duration - with memory dynamics, NAND acceleration, packaging expansion, and leading-edge logic demand cited as the key influences behind that stance.
Summary: Morgan Stanley raised its WFE market forecasts to $149bn for 2026, $191bn for 2027 and introduced a $215bn estimate for 2028; the bank pointed to persistent memory imbalances, rapid NAND investment, and rising packaging and logic demand as reasons to expect a longer equipment cycle and shifted ratings on Lam Research, Applied Materials and MKS.