AMAT Climbs 8% in a Month: Time to Buy, Sell or Hold the Stock?

Applied Materials AMAT shares have risen 7.6% in a month, outperforming the Zacks Computer and Technology sector and the Zacks Electronics - Semiconductors industry’s decline of 1.6% and 0.1%, respectively.

AMAT One-Month Performance Chart

The rise in the stock price has made AMAT a premium, as it trades at a forward price-to-sales (P/S) ratio of 8.67, which is above the Zacks Electronics - Semiconductors industry’s P/S ratio of 8.46.

AMAT Forward 12-Month Valuation Chart

Given AMAT’s stock price rise in the past month and its overvaluation at present, investors might question: Should they buy, hold or sell the stock? Let’s discuss the fundamentals in detail.

AMAT Gains From Traction Across Its Portfolio

AMAT specializes in Gate-All-Around (GAA) transistors at 2nm and below, Backside power delivery, Advanced wiring and interconnect, HBM stacking and hybrid bonding and 3D device metrology, which are indispensable for manufacturing next-generation semiconductor chips. Recent launches like Xtera epi, Kinex hybrid bonding, and PROVision 10 eBeam will add to AMAT’s growth story.

AMAT expects next-generation technologies to be produced in large volume, which means that the company’s customers will be ramping up their foundries, naturally benefiting AMAT’s business. In 2025, AMAT strengthened its leadership in DRAM, growing revenues from leading-edge customers by more than 50%. This trend is likely to continue in the future.

AMAT expects its leading-edge foundry, logic, dynamic random access memory and high bandwidth memory to be the fastest-growing wafer fabrication equipment businesses in 2026. AMAT’s advanced packaging business, which is currently valued at $1.5 billion, is still on track to double to $3 billion over the next few years, driven by HBM demand and next-generation packaging architectures.

These factors will contribute to increased traction in Applied Materials’ wafer fabrication equipment (WFE), driven by growing usage of semiconductors in artificial intelligence and high performance computing. AMAT reported that its leading-edge foundry/logic, DRAM and advanced packaging will be the fastest-growing areas of the WFE market.

AMAT restructured its pricing program, and it is expected to contribute most of the 120-bps gross margin expansion in the coming fiscal year. This cost restructuring will further provide AMAT with enough headroom to ramp up its R&D investments. AMAT is setting up the Equipment and Process Innovation and Commercialization center for research, which is expected to be operational by 2026.

AMAT Navigates Competitive Challenges

Applied Materials is winning over its competition like KLA Corporation KLAC, Lam Research LRCX and ASML Holding ASML in the semiconductor supply chain market.

Lam Research develops Atomic Layer Deposition tools like AT200M, AT410 and AT650P that are similar to the devices made by AMAT. Both ASML and AMAT specialize in advanced semiconductor nodes, although they develop solutions for various stages of semiconductor production. ASML Holdings develops lithography solutions, including EXE and NXE systems.

Applied Materials and KLA Corporation offer similar solutions like Wafer Inspection, Yield Enhancement and Process Control inspection systems. KLA Corporation develops inspection systems, including 3935 and 3920 EP broadband plasma defect inspection systems. Although Applied Materials is dealing with a broader market sell-off and growing competition, not everything is gloom and doom for the company.

Applied Materials leads the market with its superior design wins. It is well-positioned to capitalize on the technology-inflection-led growing demand for next-generation chips on the back of its product innovations and leadership in leading-edge logic, compute memory, high bandwidth memory and advanced packaging.

AMAT is likely to capitalize on AI-driven semiconductor demand. The company has made significant strides in cutting-edge chip manufacturing, particularly in GAA transistors, high-bandwidth memory and advanced packaging. These innovations are critical to enabling faster, more energy-efficient AI processing.

With these factors in place, AMAT’s long-term growth outlook remains strong. The Zacks Consensus Estimate for AMAT’s fiscal 2027 revenues are expected to rise 13.3% year over year. The Zacks Consensus Estimate for AMAT’s fiscal 2027 earnings is expected to grow 22% year over year. AMAT's fiscal 2027 earnings estimates have been revised upward in the past 30 days.

Conclusion: Buy AMAT Stock for Now

The continuous strength across wafer fabrication equipment for foundry/logic, DRAM, NAND, flash memory, GAA and advanced packaging, driven by increased usage of semiconductors in artificial intelligence and high performance computing, is a tailwind for AMAT stock. Considering these long-term growth factors, we suggest investors book this Zacks Rank #2 (Buy) stock at present. 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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