TL;DR
· According to market reports, Citi expects a global WFE bull-case scenario to reach $250 billion by 2028.
· TSMC, Samsung, and Intel account for about 55% of global WFE spending in 2025, and earnings guidance will determine the potential upside for any upward revisions.
· The upside for equipment stocks still depends on the durability of AI demand, whether Samsung’s investment is executed effectively, and Intel’s progress in foundry operations.

TSMC, Intel, and Samsung will disclose their Q2 results one after another in mid-to-late July, and semiconductor equipment stocks are also set for another test of capital expenditure expectations. According to market reports, ahead of the earnings season, Citi continues to be bullish on wafer-fab equipment spending, believing that AI/HPC demand is driving investment in advanced nodes, memory, and foundry capacity. For investors, WFE refers to wafer-fab equipment spending, covering key equipment procurement such as lithography, etching, deposition, and testing—directly impacting order flow and revenue for equipment companies like Applied Materials, Lam Research, Teradyne, and others.

The focal point of the equipment cycle shifts from 2026 to the following two years

In the prior phase, semiconductor equipment stocks rose largely due to investment expectations driven by AI servers, advanced packaging, HBM, and advanced logic process nodes. Now the market is asking whether capital expenditures can be revised upward from 2026 and continue to ramp up in 2027 and 2028.

According to market reports, Citi’s WFE bull-case scenario is about $145 billion in 2026, about $200 billion in 2027, and about $250 billion in 2028. The brokerage report language also shows that TSMC, Samsung, and Intel together account for about 55% of global WFE spending in 2025. If the three companies maintain or raise their medium- to long-term capital expenditures, there is room for the equipment cycle to be lifted further.

The next few earnings reports will provide more direct clues. TSMC will release earnings on July 16, while Intel will report results after the close on July 23. Samsung already issued its Q2 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 quarterly revenue and profit, but also scrutinize capital expenditure guidance, demand for advanced nodes, the pacing of memory investment, and management’s comments on AI demand over the next three years.

The transmission chain for equipment companies is relatively clear. If wafer fabs increase capital expenditures, equipment companies’ orders and shipments benefit first. If demand remains tight, equipment makers still have opportunities to support gross margins through improvements in product mix and higher capacity utilization. The equipment-related companies mentioned in Citi’s report include Applied Materials, Lam Research, Teradyne, and AEIS, but the upside elasticity of these individual stocks still hinges on the timing of customer purchasing.

TSMC is the strongest anchor, with 2027 assumptions clearly above consensus

TSMC remains the most critical driver in this AI capital expenditure cycle. During the April earnings call, TSMC confirmed its 2026 capital expenditure guidance of $52 billion to $56 billion and said that spending is trending toward the upper end of the range. The market expects the company will most likely keep its 2026 guidance in the forthcoming earnings release and continue to emphasize demand for advanced nodes and advanced packaging.

The bigger watch point is in the following two years. Citi’s model shows TSMC’s 2027 capital expenditures at $75 billion and 2028 capital expenditures at $80 billion, corresponding to year-over-year growth rates of 36% and 7%, respectively. This assumption is above market consensus, especially the gap in 2027.

The core rationale behind this view is that AI/HPC demand continues to pull forward expansions of advanced process capacity. TSMC captures AI chip demand from NVIDIA, AMD, Broadcom, and others, and it also benefits from advanced packaging, CoWoS, and the migration to higher-end process nodes. As long as AI chip orders remain strong, TSMC has the motivation to continue purchasing more front-end and back-end equipment.

However, higher capital expenditures do not automatically mean the equipment cycle is already locked in. Whether 2027 and 2028 can reach the optimistic model still depends on the persistence of AI orders, customers’ cadence for in-house chip development, whether advanced packaging bottlenecks ease, and whether equipment delivery timelines can keep up.

Samsung and Intel bring incremental upside—and also uncertainty

If TSMC provides the base case for the equipment cycle, Samsung and Intel determine the upside potential.

In its April call, Samsung said that AI demand will drive a substantial year-over-year increase in capital expenditures. Citi’s model shows that Samsung Semiconductor’s capital expenditure growth remains at high rates from 2026 through 2028. There are two lines here: storage investment driven by HBM and high-end DRAM demand, while Samsung’s advanced logic and foundry business will determine whether it can continue to catch up to TSMC at higher-end process nodes.

Samsung’s long-term investment plan also amplifies the imagination around equipment demand. Public sources vary on the specific definitions used. Samsung’s press releases and media reports cover different scopes, including the group’s total domestic investment, Samsung Electronics’ future business plans, and investments in the semiconductor cluster. A more cautious way to put it is that Samsung’s Korea-linked investment related to semiconductors over the coming decade or more is likely to be about 2,000 trillion won or more. This long-term plan spans multiple years; how much of it converts into equipment purchases in the near term still depends on the details of fab construction, equipment intake timing, and the cadence of capacity ramp-ups.

Intel’s situation is even more complex. In its Q1 earnings call, Intel adjusted its 2026 capital expenditure framework from the prior “flat to down” to “flat,” and said tool- and equipment-related spending is expected to grow about 25% year over year. In Citi’s model, Intel still has an upward assumption for capital expenditures in 2027 and 2028, with even greater upside flexibility in 2028.

Whether Intel can deliver this incremental upside depends on its foundry business. 18A process validation, 14A customer decisions, and potential collaboration with major customers will all affect the intensity of subsequent investment. If customer progress on advanced nodes falls below expectations, it will be difficult for capital expenditures to be released according to an optimistic scenario. If the foundry transition shows substantive progress, Intel could become an important incremental source for continued upward growth in global WFE.

Micron validates storage demand, but cannot replace the guidance from the three giants

Capital expenditures from memory makers are also providing validation for the equipment cycle. Micron has raised its FY2026 capital expenditure guidance to about $27 billion. The company also said that its FY2027 quarterly capital expenditure level is expected to be about $10 billion higher than the level in FY4Q26. If that quarterly level continues, Micron’s full-year FY2027 capital expenditures could exceed $40 billion.

This indicates that AI server-driven HBM, high-end DRAM, and storage demand is not just a story on the logic process side. Storage capacity expansion will also push up equipment procurement, especially benefiting deposition, etching, testing, and packaging-related segments. According to reports, Micron’s U.S. long-term investment plan has also been increased to more than $250 billion, with the time horizon extending to around 2035.

That said, Micron is more of a side confirmation of storage demand and cannot replace the guidance from TSMC, Samsung, and Intel. The three companies together account for about 55% of global WFE spending in 2025. What truly determines the height of the equipment cycle is still what they say about capital expenditures for 2026 through 2028 over the next few quarters.

The $250 billion assumption gets stuck after 2027

The biggest divergence in this earnings-season preview is that Citi’s assumptions for 2027 and 2028 are clearly more optimistic than the market’s. The upward revision for 2026 is relatively easier to understand, because AI demand is already reflected in orders and capacity expansions. After 2027, sustaining a sharp increase in capital expenditures requires more conditions to be met at the same time.

AI/HPC demand needs to stay strong, not just a short-term surge in purchasing by cloud providers. TSMC’s advanced node and advanced packaging expansions require sustained customer order support. Samsung’s large-scale long-term investment plan needs to translate into specific equipment spending, rather than remaining at the level of fab construction and long-range planning. Intel’s foundry business must also demonstrate that the 18A and 14A nodes have enough customers and viable prospects for ramping into mass production.

Equipment delivery cycles, the macro environment, and fluctuations in the semiconductor cycle will also affect actual spending. Capital expenditure plans can be raised, but they can also be delayed due to changes in customer demand, declining capacity utilization, or financing pressures.

The story for equipment stocks is still centered on the three major wafer-fab makers. If earnings continue to release strong signals for capital expenditures, the global WFE bull-case scenario will receive more support. If management’s comments on 2027 and 2028 shift toward caution, the market’s expectations for $250 billion in equipment spending will need to be discounted. The current controversy is not whether AI capital expenditures exist, but whether this expansion can carry over beyond 2026.

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