TL;DR

• According to market reports, Citigroup expects the global WFE bull market scenario to reach $250 billion by 2028.
• Taiwan Semiconductor Manufacturing Company, Samsung, and Intel together account for approximately 55% of global WFE spending in 2025, and financial report guidance will determine the upward revision potential.
• The benefits for equipment stocks still depend on the sustainability of AI demand, Samsung's investment implementation, and Intel's progress in contract manufacturing.

Taiwan Semiconductor Manufacturing Company, Intel, and Samsung will successively disclose their second-quarter earnings in mid to late July, and semiconductor equipment stocks will also undergo a test of capital expenditure expectations. According to market reports, Citigroup maintains a bullish outlook on wafer fab equipment spending before earnings season, believing that AI/HPC demand is driving up investments in advanced processes, storage, and contract manufacturing. For investors, WFE refers to spending on wafer fab equipment, covering key equipment purchases such as lithography, etching, deposition, and testing, directly affecting orders and revenues of equipment companies like Applied Materials, Lam Research, and Teradyne.

The Focus of the Equipment Cycle Shifts from 2026 to the Next Two Years

The previous phase of semiconductor equipment stocks' rise was mainly driven by investment expectations from AI servers, advanced packaging, HBM, and advanced logic processes. Now the market is questioning whether capital expenditures can be revised upward from 2026 and extend to 2027 and 2028 for further growth.

According to market reports, Citigroup's bullish scenario for WFE predicts approximately $145 billion in 2026, about $200 billion in 2027, and about $250 billion in 2028. Brokerage reports also indicate that TSMC, Samsung, and Intel together account for about 55% of global WFE spending in 2025. If these three companies maintain or adjust their mid- to long-term capital expenditures upward, there will be room for the equipment cycle to continue to rise.

The upcoming earnings reports will provide more direct clues. TSMC will announce its earnings report on July 16, Intel will disclose its performance after the market closes on July 23, and Samsung already released its second-quarter earnings guidance on July 7 and will hold an earnings call on July 30 at 10:00 KST. The market will not only look at the revenue and profits of the current quarter but will closely monitor guidance on capital expenditure, demand for advanced processes, the pace of storage investment, and management's statements on AI demand for the next three years.

The transmission chain for equipment companies is relatively clear. When wafer fabs increase capital expenditures, equipment companies benefit first through orders and shipments. If demand remains tight, equipment manufacturers also have opportunities to support gross margins through product mix improvements and increased capacity utilization. Companies mentioned in Citigroup's report related to equipment include Applied Materials, Lam Research, Teradyne, and AEIS, but the elasticity of these stocks still relies on clients' purchasing rhythms.

TSMC is the Strongest Anchor, with 2027 Assumptions Significantly Above Consensus

TSMC remains the most critical player in this AI capital expenditure cycle. In its earnings call in April, TSMC confirmed its capital expenditure guidance for 2026 to be between $52 billion and $56 billion, indicating a tendency toward the high end of the range. The market expects that the company will most likely maintain its 2026 guidance in the upcoming earnings report and continue emphasizing demand for advanced processes and advanced packaging.

The bigger focus lies in the next two years. Citigroup's model predicts TSMC's capital expenditure to be $75 billion in 2027 and $80 billion in 2028, corresponding to year-on-year growth rates of 36% and 7%, respectively. This assumption is higher than the market consensus, especially for 2027, where the gap is more pronounced.

The core support for this judgment is that AI/HPC demand continues to drive the expansion of advanced process capabilities. TSMC satisfies the demand for AI chips from companies like Nvidia, AMD, and Broadcom, and also benefits from advanced packaging, CoWoS, and migration to higher-end processes. As long as AI chip orders remain robust, TSMC will have the motivation to continue acquiring more front-end and back-end equipment.

However, high capital expenditures do not equate to the equipment cycle being locked in. Whether 2027 and 2028 can reach optimistic models also depends on the sustainability of AI orders, the rhythm of clients' self-developed chips, alleviation of advanced packaging bottlenecks, and whether the equipment delivery cycle can keep pace.

Samsung and Intel Bring Incremental Growth and Uncertainty

If TSMC provides the foundation for the equipment cycle, Samsung and Intel determine the upward potential.

Samsung indicated in its April earnings call that AI demand will significantly drive year-on-year growth in capital expenditures. Citigroup's model shows that Samsung's semiconductor capital expenditures will still have high growth rates from 2026 to 2028. This includes two lines: demand for HBM and high-end DRAM driving storage investments, while advanced logic and contract manufacturing businesses will determine if Samsung can continue to catch up to TSMC in higher-end processes.

Samsung's long-term investment plans have also amplified the imagination regarding equipment demand. Public sources indicate discrepancies in specific measures; Samsung's press releases and media reports cover different scopes such as overall group domestic investment, future business plans of Samsung Electronics, and semiconductor cluster investments. A more cautious statement would be that Samsung's semiconductor-related investments in South Korea over the next decade are estimated to be over 200 trillion Korean won. This long-term plan spans multiple years, and how much can be converted to equipment purchases in the short term still depends on specific plant construction, equipment entry, and capacity release rhythms.

Intel's situation is more complex. In its Q1 earnings call, the company adjusted its 2026 capital expenditure guidance from "flat to down" to "flat" and indicated that tool and equipment-related expenditures are expected to grow approximately 25% year-on-year. In Citigroup's model, Intel still has upward assumptions for capital expenditures in 2027 and 2028, with greater elasticity in 2028.

Whether Intel can deliver this incremental growth heavily hinges on its contract manufacturing business. The validation of the 18A process, decisions from 14A clients, and potential collaborations with major customers will all impact subsequent investment intensity. If progress with advanced process customers falls short of expectations, it will be difficult for capital expenditures to be released according to the optimistic scenario. If there are substantial advances in the contract manufacturing transition, Intel will become an important incremental source for continued growth in global WFE.

Micron Validates Storage Demand, but Cannot Replace Guidance from the Three Giants

Capital expenditures in the storage sector are also providing validation for the equipment cycle. Micron has raised its FY2026 capital expenditure guidance to about $27 billion. The company also stated that the quarterly capital expenditure level for FY2027 is expected to be higher than the approximately $10 billion level of FY4Q26. If this quarterly level persists, FY2027's total capital expenditures could exceed $40 billion.

This indicates that storage demands from AI servers, HBM, high-end DRAM, and storage are not just a story from the logic processing side. The expansion of storage will also drive up equipment purchases, especially benefiting deposition, etching, testing, and packaging-related sectors. Reports suggest that Micron's long-term investment plan in the U.S. has also increased to over $250 billion, stretching until around 2035.

However, Micron serves more as a corroborative witness to storage demand rather than a substitute for guidance from TSMC, Samsung, and Intel. Together, these three companies account for about 55% of global WFE expenditures in 2025, and the actual determination of the equipment cycle's height still relies on their statements regarding capital expenditures for 2026 to 2028 in the coming quarters.

The $250 Billion Assumption Hangs on 2027 and Beyond

The biggest divergence in this earnings season preview lies in Citigroup's significantly more optimistic assumptions for 2027 and 2028 compared to the market. The upward revision for 2026 is relatively easy to understand, as AI demand has already reflected in orders and expansion. By 2027, however, a substantial increase in capital expenditures requires the simultaneous fulfillment of more conditions.

AI/HPC demand needs to remain strong, rather than concentrating on short-term bulk purchases by cloud providers. TSMC's expansion in advanced processes and advanced packaging needs sustained support from customer orders. Samsung's large-scale long-term investment plans must translate into specific equipment expenditures, rather than remain at plant construction and long-term planning. Intel's contract manufacturing business must also prove sufficient customers and prospects for mass production at the 18A and 14A nodes.

The equipment delivery cycle, macro environment, and fluctuations in the semiconductor cycle will also affect actual expenditures. Capital expenditure plans can be revised upwards but may also be delayed due to changes in customer demand, decreased capacity utilization, or financing pressures.

The story of equipment stocks still revolves around the three major wafer fabs. If earnings reports continue to signal strong capital expenditures, the global WFE bull market scenario will gain more support. If management expresses cautious sentiments about 2027 and 2028, market expectations for $250 billion in equipment spending will need to be discounted. The current point of contention is not whether there is AI capital expenditure, but whether this expansion can cross the 2026 threshold.

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