Thoughts On K3 And Implications For Our Coverage

Research evidence excerpt

Thoughts On K3 And Implications For Our Coverage

TD SECURITIES (USA) LLC INDUSTRY UPDATE

July 21, 2026

■Semiconductor Capital Equipment Thoughts On K3 And Implications For Our

■Semiconductors

■Technology Hardware: Storage & Coverage

Peripherals

Krish Sankar THE TD COWEN INSIGHT

415 646 7372

China's K3 model release, together with GPT 5.6 launching at ~30% discount to Anthropic's

krish.sankar@tdsecurities.com

Opus4.8 at similar capabilities, has introduced a new debate around AI lab economics. The

Joshua Buchalter, CFA relevant question is not whether open or closed-source models win, but whether increasing

646 562 1303 competition begins to pressure industry unit economics enough to affect LT WFE & memory/

joshua.buchalter@tdsecurities.com

HDD pricing. Some questions to ponder!

Eddy Orabi

415 646 7371 Read-Through: While we do think this sentiment is initially negative for our coverage (ex-AAPL

eddy.orabi@tdsecurities.com & Everpure/NTAP) as it pushes investors to debate the duration of this CapEx cycle, we think

Lannie Trieu, CFA it's important to remember that over the last 3 yrs, new unexpected model capabilities have

415 646 7217 emerged and have elongated the cycle during times of skepticism on durability. This includes;

lannie.trieu@tdsecurities.com Thinking models benefiting DRAM in Sep'24, NVDA's Context Memory Storage benefiting NAND

in Jan'26, CPU AGI inflection in Mar'26, and SNDK LTAs in May'26 catalyzing long-term WFE

Steven Chin

expectations.415 646 7374

steven.chin@tdsecurities.com That said, this is the first time that the economics for the AI labs are under scrutiny, and the

Robert Mertens, CFA unanswered question is whether sustained pressure on lab economics ultimately changes

646 562 1338 hyperscaler CapEx plans.