TLDR
- Bernstein says semiconductor equipment (WFE) stocks don’t always move with memory stocks — historical correlation is only 0.4 to 0.6
- From 2021–2022, WFE rose 15.3% while memory fell 34% — a 49 percentage point gap
- Bernstein is bullish on WFE through 2028, citing rising memory capex including SK Hynix’s KRW 100 trillion fab investment
- Bernstein rates Montage Technology as Outperform, raising its A-share target to CNY 400
- Montage’s ESP business is projected to grow at a 76.5% CAGR from 2025 to 2028
Bernstein has pushed back against a common investor assumption — that semiconductor equipment stocks rise and fall with memory chip stocks. According to the firm, the data tells a different story.
Analyst David Dai wrote in a Monday note that the historical correlation between top memory companies and the top five wafer fabrication equipment (WFE) firms was just 0.4 between 2012 and 2018. Since 2019, that number has risen, but only to 0.6.
By comparison, WFE stocks have maintained a much tighter correlation of 0.8 to 0.9 with the broader SOX semiconductor index.
Two Periods That Tell the Story
Bernstein pointed to two stretches where the gap between WFE and memory was especially wide.
From January 2015 to December 2016, WFE stocks rose 21.9% while memory stocks fell 16.2% — a 38.2 percentage point difference. From January 2021 to December 2022, WFE gained 15.3% while memory dropped 34%, a gap of 49 percentage points.
Dai said investors can benefit from treating these as separate holdings rather than assuming they must move together.
The reason, he explained, is structural. WFE growth is needed to build out new memory capacity, and it’s that capacity growth that actually causes memory price swings. The two sectors are linked in cause and effect, not in share price movement.
Bernstein’s Top Picks
Bernstein maintained positive ratings on Samsung, SK Hynix, and Micron following recent pullbacks. It cited SK Hynix’s newly announced KRW 100 trillion investment in Cheongju fabs as evidence of accelerating memory capital spending.
The firm sees upward revision potential for both WFE market estimates and company earnings per share through 2028.
Bernstein rated Kioxia at Underperform, pointing to valuation concerns and long-term competitive pressure from Chinese chipmakers.
On the China side, Bernstein named Montage Technology as a standout pick in the memory interface chip space. The firm rates it Outperform and raised its A-share target price to CNY 400.
Bernstein lifted its 2027 and 2028 earnings per share estimates for Montage by 19% and 73% respectively. The increases reflect stronger expectations around the CPU upgrade cycle and rising adoption of MRDIMM interface chips.
The firm also raised its target multiple on Montage from 44x to 50x, driven by growth in the company’s ESP business, which is projected to expand at a 76.5% compound annual growth rate from 2025 to 2028.
For Montage’s H shares, Bernstein set a target of HKD 520, a 15% premium to the A-share target. The firm said H shares attract a premium because Montage is seen as a rare China-based AI-exposed company that avoids direct geopolitical risks, unlike peers facing export controls or entity list restrictions.
Bernstein noted that H share free float remains limited due to lock-up restrictions and expects the premium to stay elevated in the near term. The implied price-to-earnings multiple on H share forward earnings sits at 58x at the target price.
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