TD Cowen has upgraded KLA to Buy from Hold, anticipating a rise in leading-edge foundry investments that favor the company's strengths. The firm raised its price target to $1800, citing underestimated market expectations for KLA’s ability to capture more wafer fab equipment spending through 2027. Investors have focused on memory spending due to rising DRAM and NAND prices, but TD Cowen expects advanced foundry production—led by TSMC and potentially boosted by Intel's execution improvements—to be the fastest-growing segment.

KLA’s dominance in inspection and metrology tools positions it well as chip designs grow more complex amid rising AI-related demand. The brokerage argues that AI-driven capital expenditure is still nascent, with much demand met by existing capacity rather than new purchases. Key catalysts include updates on TSMC's capital plans and broader AI adoption.

Risks remain in memory spending volatility and geopolitical tensions, though TD Cowen sees more upside than downside for KLA moving forward.