AMAT Stock Trades at a P/E of 16.69X: Should You Buy, Sell or Hold?

Applied Materials AMAT stocks are trading at a forward 12-month P/E of 16.69X, which is lower than the Zacks Electronics - Semiconductors industry’s P/E of 34.47X. Although AMAT appears to be discounted, let's delve deeper into its fundamentals to understand if the valuation is justified or if it shows signs of weakness.

AMAT Forward 12 Month (P/E) Valuation Chart

AMAT stock has underperformed the industry. In the year-to-date period, AMAT stock has climbed 0.5% compared with the industry’s return of 19.7%. The underperformance of AMAT’s share price raises the question: Should investors buy, hold or sell AMAT stock?

AMAT YTD Performance Chart

Sluggish Sales in China: A Key Concern for AMAT

A major headwind for Applied Materials is increasing U.S.-China tensions and export restrictions on semiconductor manufacturing equipment. China remains a crucial market for Applied Materials, accounting for a significant portion of total revenues. However, U.S. government restrictions on selling advanced semiconductor equipment to Chinese manufacturers are hurting Applied Materials’ sales and growth outlook.

Applied Materials experienced a sharp decline in China from the fourth quarter of 2024 to the second quarter of 2025, recovering marginally in the third quarter of 2025. However, for AMAT, its China business is creating increased uncertainty and lower visibility in the near term. The company expects a decline in revenues in the fourth quarter due to the digestion of capacity in China.

AMAT faces elevated uncertainty in China due to ongoing geopolitical tensions and regulatory scrutiny. If stricter export controls are imposed, Applied Materials’ long-term revenue potential could take a hit, as Chinese chipmakers are forced to turn to domestic alternatives or non-U.S. suppliers.

AMAT Faces Macroeconomic and Competitive Headwinds

Although the broader semiconductor market is recovering, memory markets, including DRAM and NAND, remain weak. The company expects only a gradual recovery in memory-related semiconductor demand in 2025, which could weigh on Applied Materials’ revenue growth in the near term. Furthermore, the competition from players like KLA Corporation KLAC, Lam Research LRCX and ASML Holdings ASML in the semiconductor supply chain market is also a concern for AMAT.

Lam Research’s memory segment, accounting for both Dynamic Random Access Memory and Non-Volatile Memory divisions, is gaining traction on the back of AI. Lam Research’s memory and Non-Volatile Memory division’s sales are gaining traction. The rising demand for AI chips is also ramping up the demand for advanced process control and process-enabling solutions provided by KLA Corporation.

KLAC’s advanced packaging solutions are also experiencing robust traction on the back of AI and high-performance computing. ASML Holding’s DRAM and logic customers are driving the demand for its products. These customers are ramping up leading-edge nodes using ASML’s NXE:3800E EUV systems. Additionally, ASML noted that multiple DRAM customers are adopting EUV lithography, which helps in shortening cycle time and lowering costs.

AMAT’s 200-Day and 50-Day SMAs Suggest Bearish Trend

AMAT’s shares are trading below the 200-day and 50-day moving averages, indicating a bearish trend.

Conclusion:  Sell AMAT Now

Although AMAT shares may appear discounted, weak fundamentals, macroeconomic headwinds, and U.S. tariff policies weigh on its attractiveness. Moreover, both the 200-day and 50-day SMAs point to a downward trend. Considering these factors, we recommend investors to avoid this Zacks Rank #4 (Sell) stock. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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