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Semiconductor Equipment Growth Stays Massive: 5 Stocks to Buy for Now and 2018

It would seem like the incredible growth in semiconductors and the equipment used to make them would slow down after a torrid last few years. Surprisingly, or however, 3D NAND and foundry spending remains very strong. If the positive tone at the recently finished Semicon West is any indication, the strength in the chip and chip equipment sector is poised to stay — and not just this year, but possibly well into 2018.

In a new research report from Stifel, the financial services firm acknowledges that much of the sectors good data and trends are factored in, but it continues to stay very positive on the top chip equipment companies on a near-term and long-term basis. The report noted this in regards to expectations going forward:

In terms of the stocks, we do believe that the “good news” in the environment is now generally being factored into the stock prices, but we could see some larger-than-expected upside surprises in the upcoming earnings season, which may provide an additional boost. Having said that, we believe that the strength in 2018 is not completely built in and thus, there is longer term upside to the group over the next few months once the focus completely shifts to 2018.

Five companies are favorites at the company, with two large-cap leaders pacing the group. All of these shares have “Buy” ratings at Stifel.

Applied Materials

This stock is a semiconductor capital equipment leader that some on Wall Street feel has the broadest range of exposure to 3D NAND and foundry display. Applied Materials Inc. (NASDAQ: AMAT) is the global leader in precision materials engineering solutions for the semiconductor, flat panel display and solar photovoltaic industries. Applied Material’s technologies help make innovations like smartphones, flat screen TVs and solar panels more affordable and accessible to consumers and businesses around the world.

The analysts are very positive on the stock and see Applied Materials benefiting not only on the semiconductor side of the business, but also from larger, higher resolution and flexible screens on the display side of the business. The company reported solid first quarter earnings that were above consensus, and gave guidance that was inline with expectations. Most Wall Street analysts see continued FinFET capacity expansion (10nm/14nm/16nm) and the continued...