Applied Materials, Inc. (AMAT): A Bull Case Theory

We came across a bullish thesis on Applied Materials, Inc. on Dividend Talks’s Substack. In this article, we will summarize the bulls’ thesis on AMAT. Applied Materials, Inc.'s share was trading at $183.07 as of June 30^th. AMAT’s trailing and forward P/E were 22.27 and 19.34 respectively according to Yahoo Finance.

Applied Materials (AMAT) stands as a cornerstone in the global semiconductor supply chain, providing essential equipment, software, and services that power the fabrication of semiconductor chips and advanced displays. Its tools are vital to processes such as deposition, etching, and inspection—core stages in chip production—making AMAT an indispensable enabler of breakthrough technologies like artificial intelligence, 5G, and high-performance computing.

This strategic position has allowed the company to significantly outperform the S&P 500 over the past decade, reflecting its importance in the tech ecosystem. Despite this strong track record, AMAT still presents a compelling investment case. At a forward P/E of 19.2x—slightly above its five-year average of 18.1x—the stock does not appear expensive given its consistent earnings power and industry relevance.

With a calculated 15% margin of safety at a price of $181, the stock offers a reasonable entry point for investors seeking exposure to the semiconductor equipment space. While Wall Street consensus suggests a 10% upside over the next 12 months, the real appeal lies in AMAT’s long-term positioning as a secular beneficiary of rising global chip demand.

As AI workloads proliferate and global semiconductor capacity expands, AMAT’s deep integration into chipmaking processes places it in a favorable position to capture outsized gains. The company's valuation, technological relevance, and historical performance make it a solid pick for investors looking to leverage the growth in next-generation computing, even as near-term market sentiment remains cautiously optimistic.

Previously we covered a bullish thesis on Applied Materials, Inc. by Dan in December 2024, which highlighted the company’s leadership in semiconductor tools, strong innovation, and shareholder-friendly capital returns. The company’s stock price has depreciated approximately by 0.05% since our coverage. This is because the thesis hasn’t played out yet. Dividend Talks shares a similar view but emphasizes valuation and long-term positioning.

AMAT isn't on our list of the 30 Most Popular Stocks Among Hedge Funds. While we acknowledge the risk and potential of AMAT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.