Shares of semiconductor equipment makers are leading the tech sector after two research firms had bullish commentary on peer Applied Materials (AMAT).

SEMICON NEXT WEEK: Semiconductor equipment suppliers will likely speak to "positive expectations on industry fundamentals," said Citi analyst Atif Malik, in a research note out before the open. Malik, who also is bullish on the sector, sees the recent "pullback in the group on tech sector rotation as a buying opportunity, with group well positioned to benefit from multiple secular growth drivers thru 2020." The analyst is especially constructive on shares of Applied Materials due to its growing market share in OLED display equipment. Malik sees Applied Materials' diversification into the OLED business as a buffer to the seasonality of its wafer fabrication equipment, WFE, business, a huge part of most equipment makers businesses. "With WFE shipments set to decline thru 2H17 on capex seasonality, we move Applied Materials to our number one pick," said Malik, citing its display business as Asian panel makers, like LG and Samsung, ratcheting up their investments in display equipment. According to the Citi note, Applied Materials can grow its display business 25% in calendar year 2018, " on sustained display CapEx plus modest SAM expansion on new products. Citi raised his price target on Applied Materialss shares to $60 from $52.

The approaching SEMICON West event encouraged a separate bullish note out of Morgan Stanley this morning. Despite semiconductor equipment makers "overearning their cycle average, ongoing improvements in memory keep equipment revenues stronger for longer than our expectations," said Morgan Stanley analyst Joseph Moore in a research note to investors earlier. Memory chip demand and pricing have recently been robust and is seen rising. Memory chip makers like Micron (MU) have been on a tear this year as supply is tight amid a broad-based demand for servers, including cloud servers and data centers. Also adding to the demand for memory are the new phones from Apple and Samsung set to be introduced in the fall. Morgan Stanley also sees bullish commentary from Applied Materials at SEMICON next week, especially due to the equipment maker's display business. "The intermediate term outlook for capital spending in both semis and display continues to improve. In particular, the continued improvement in memory, and the growing importance of the display investment cycle as phones switch to new "OLED" technology, both continue to be much stronger than our prior expectations," said Morgan Stanley analyst Joseph Moore. Moore raised 2018 semiconductor capex forecasts to up 1% from down 8% primarily due to memory spending, resulting in a material increase in Applied Materials estimates.

His FY18 earnings forecast moves up to $3.31 from $2.87 and revenues go up to $15.3B from $13.9B. Moore reiterated his Overweight on Applied Materials and increased his price target to $52 from $47. PRICE ACTION: Shares of Applied Materials are leading the equipment-makers, up almost 4%. Other names in the group are all higher, including Lam Research (LRCX) and KLA-Tencor (KLAC), also up approximately 4%. ASML (ASML) and Teradyne (TER) are up around 2%, while Kulicke & Soffa (KLIC) is higher by 4%.