Makers of equipment used to manufacture semiconductors have faced a slowing market so far in 2013, and conditions are not expected to improve until next year. That is on top of a decline of 16.1% in 2012, according to the latest research from Gartner Inc. (NYSE: IT).

Spending on capital equipment among the chip makers is forecast to total $34.6 billion in 2013, down 8.5% from $37.9 billion a year ago. Gartner attributes the decline to in investment in equipment to make the 28-nanometer chips used in mobile phones.

The market for wafer fabrication equipment is expected to decline even more, from $29.6 billion in 2012 to about $27 billion, a drop of 9.1%.

The worst is behind the equipment makers, though, according to Gartner. The research firm expects capital equipment spending to pick up in the second half of this year and to grow by 15.8% in 2014 and 17% in 2015. Spending on wafer fab equipment is forecast to rise by 14.9% next year and 19.6% in 2015.

Stocks in equipment makers have posted some impressive gains this year. Netherlands-based ASML Holding N.V. (NASDAQ: ASML) is up nearly 35% in the past 12 months. Applied Materials Inc. (NASDAQ: AMAT) is up about 40%, KLA-Tencor Corp. (NASDAQ: KLAC) is up about 28%, Teradyne Inc. (NYSE: TER) is up about 9% and Lam Research Corp. (NASDAQ: LRCX) has posted a whopping 51% gain.

Are the shorts prepared? Teradyne is the most heavily shorted of these stocks, with 12.9% of shares short at the end of August. Lam Research is next with 4.8% of shares held short. Some 3.2% of KLA-Tencor shares are held short and just 1.3% of Applied Materials’ shares are short. No short data is available for ASML.

How are these stocks valued? ASML has a consensus target price of around $90.40 and is trading at $95.34 on Thursday afternoon. Applied Materials has a price target of $16.44 and is trading today at about $16.13. KLA-Tencor’s price target is around $63.40 and shares are trading at $61.71 today. Lam Research has a price target of around $57 and is trading at $49.73, while Teradyne’s price target is around $20.80 and the stock is trading at $16.35.

ASML and Applied Materials have no headroom. KLA-Tencor’s implied gain is a mere 2.7%, while Lam Research’s implied gain is 14.6% and Teradyne’s is 27.2%.

Gartner notes that the market for memory chips will pick up more of the slack in the fourth quarter and that 2014 spending on capital equipment will be led by Intel Corp. (NASDAQ: INTC) as the world’s largest chip maker moves into production of 14-nanometer chips.

Gartner also expects chip makers to curb spending in 2016 before increasing it again in 2017.

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