Mizuho has upgraded Applied Materials (AMAT) stock to Outperform from Neutral, anticipating a strong rebound in semiconductor capital spending. Analyst Vijay Rakesh raised the price target to $370 from $275, citing a "significant acceleration" in wafer fab equipment (WFE) spending through 2027. This positive outlook is fueled by increased demand from foundry and logic customers.

Mizuho forecasts WFE to increase 13% year-over-year in 2026 and 12% in 2027. The firm anticipates strong AI-related demand will drive investment in leading-edge nodes. AMAT is well-positioned to benefit, with approximately 65% of its revenue stemming from foundry and logic clients. TSMC's capex is also projected to rise.

Strong WFE growth creates "strong tailwinds for all WFE suppliers," according to Mizuho. While China remains a headwind, the firm expects faster growth in ex-China markets, which constitute about 70% of AMAT's revenue. Investors should watch how this plays out, especially given the ongoing geopolitical tensions impacting the chip industry.