Rothschild & Co Redburn Downgrades Applied Materials (AMAT) Stock to Neutral

Applied Materials, Inc. (NASDAQ:AMAT) is one of the Top 10 Software and Technology Stocks to Buy Now. Rothschild & Co Redburn downgraded the company’s stock to “Neutral” from “Buy” with a price objective of $200, down from the prior target of $225, as reported by The Fly. As per the firm, China’s push for semiconductor self-sufficiency tends to challenge much of the company’s portfolio. This comes when competitors have taken a share in Applied Materials, Inc. (NASDAQ:AMAT)’s core physical vapor deposition business. Furthermore, the firm is concerned that the U.S. export restrictions might ramp up China’s strategy to become 70% self-sufficient in semiconductor wafer fabrication equipment.

However, Applied Materials, Inc. (NASDAQ:AMAT)’s broad capabilities and connected product portfolio continue to drive robust results in 2025 amidst a dynamic macro environment. Since high-performance, energy-efficient AI computing is the dominant driver of semiconductor innovation, Applied Materials, Inc. (NASDAQ:AMAT) continues to work with its customers and partners to accelerate the broader industry’s roadmap. For Q3 2025, the company expects total net revenue of $7,200 million (+/- $500 million), and a non-GAAP gross margin of 48.3%.

Vltava Fund, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:

“In the quarter just ended, we added to the portfolio two new companies from the technology sector: Applied Materials, Inc. (NASDAQ:AMAT) and Lam Research. Both are in the same industry as is another of our investments that we have held for some time, KLA Corporation. This industry is termed semiconductor devices and materials. One chapter in Hidden Investment Treasures is devoted to investing in technology companies and, among other things, the controversy over what really constitutes a technology company. As investors, we try to view technology companies not according to the industry into which they are formally classified but by whether the technologies and technological processes used in the production of their products and services are an essential element in value creation or if they are a source of long-term, sustainable competitive advantage. Among the companies that are formally categorized as technology-based and fall into either the Information Technology or the Communications Services sector, we find some that can be said to be just that but also others for which this classification is at least debatable. Similarly, among companies that do not formally belong to these two sectors, we find many that clearly are built to a large extent on technology and base their market positions and competitiveness on it. In the cases of Applied Materials and Lam Research, there can be no doubt that these are technology companies not only as a formality but also in fact.

Applied Materials provides manufacturing equipment, services, and software for the semiconductor, display, and related industries. Its principal business activities are semiconductor systems and Applied Global Services. Its largest customers are Samsung and Taiwan Semiconductors, but its overall clientele is more diversified than is that of Lam Research. At first glance, it would appear that Applied Materials has a somewhat less tangible and definable competitive advantage compared to KLA Corporation and Lam Research, but the numbers do not support such a view. Net margins likewise in the neighborhood of 27% and ROCE around 30% are outstanding. Basically, it can be said that all three companies we own have very similar underlying profitability metrics. Even their valuations, growth, and potential are similar. All have strong free cash flow and strong balance sheets, and they are regularly buying back their own shares over the long term and in large volumes…” (Click here to read the full text)

While we acknowledge the potential of AMAT as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

READ NEXT: 13 Cheap AI Stocks to Buy According to Analysts and 11 Unstoppable Growth Stocks to Invest in Now

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