China chip-making to surge, boosting this stock

A technician inspects a 300mm silicon wafer at the Applied Materials Maydan Technology Center in Santa Clara, California.
David Paul Morris | Bloomberg | Getty Images

Applied Materials is going to ride a wave of growth in China as the country makes more and more of its own chips for smart phones, tablets and other devices, Citi Research said Wednesday. Shares of the semiconductor capital equipment maker should post double-digit returns in the next 12 months, according to the firm.

"China is set to become an important driver for equipment spending over the next five years," Citi Research's Atif Malik wrote in a note to clients.

Applied Materials' "higher earnings on China silicon investments, sales diversification from services and non-semi display markets, and multiple expansion would drive the stock higher into calendar year 2017," the analyst added.