Evercore ISI analyst C.J. Muse noted that semiconductor stocks, as measured by the SOX index, have declined about 20% from their June highs through Friday and he thinks "now is the time" to turn more positive on the group again, though he cautioned he "could be a few weeks early" with the call. Muse, who sees 20%-25% upside in semis over a 3 month plus time frame, compared to 5%-10% downside risk, upgraded the sector to Overweight and named NXP Semiconductors (NXPI), Maxim Integrated (MXIM), Micron (MU) and Analog Devices (ADI) his top picks among chipmakers and Lam Research (LRCX), Applied Materials (AMAT) and ASML (ASML) as his top picks in semiconductor production equipment. Note that the firm upgraded Analog Devices to Buy this morning in conjunction with the sector upgrade.

Evercore ISI initiated coverage of Applied Materials with an Outperform rating and $260 price target. The analyst started coverage of the semicap equipment sector with a positive view on industry fundamentals. The firm thinks four secular drivers have transitioned the group from ex-growth to a high-single digit growth industry, and models wafer fab equipment spending of $220B in 2032, up from $100B levels recently. Evercore likes all the large cap stocks, but favor Applied Materials due to its strategic approach and attractive valuation.

Evercore ISI initiated coverage of ASML with an Outperform rating and EUR 1,085 price target. The firm believes ASML is well positioned to benefit from the SemiCap secular drivers, namely bigger chips, complex manufacturing, trailing node buildouts, and semiconductor nationalization.

Evercore ISI initiated coverage of Analog Devices with an Outperform rating and $254 price target. The company is a "Tectonic Shift play" given its position as a key supplier into the emerging internet-of-things market which the firm expects to grow to 10s of billions of units, the analyst tells investors in a research note. Evercore adds that it expects the company's operating margins to expand 1,000bps over the next 10 years.