China-Related Headwinds Force Chip Analyst To Slash Expectations on Lam Research, Applied Materials

Mizuho analyst Vijay Rakesh reiterated a Buy on Applied Materials, Inc AMAT and slashed to a $90 price target, down from $150.
Rakesh maintained a Buy on Lam Research Corp LRCX with a $400 price target, down from $650.
He saw significant near-term headwinds for WFE in 2023, primarily tied to China restrictions, but also a weaker macro moderating the outlook for logic and foundry.
Last week, AMAT announced a ~$400 million quarterly impact from China restrictions, which could increase with potential Taiwan Semiconductor Manufacturing Company Ltd TSM cuts announced late last week and weaker macro.
LRCX will likely report on October 19, and he could see a substantial cut to the outlook, primarily on China restrictions (Yangtze Memory Technologies Corp) and the broader macro.
He reduced his 2023 WFE outlook from ~$88 billion to ~$75 billion (with ~$7-8 billion impact from China versus 2022 at ~$94 billion).
Despite near-term elevated risks from geopolitical tensions, he saw AMAT and LRCX well-positioned longer-term as top global WFE market leaders, critical enablers of secular technology trends in data centers, automotive, capital intensity, and localization of WFE spending supported by governments.
Price Action: AMAT shares traded higher by 1.03% at $75.18 on the last check Tuesday.