AMAT Rides on AI Demand: Will Logic and DRAM Strength Last?

Core Insights - Applied Materials (AMAT) is experiencing increased demand due to the rise of AI infrastructure, particularly in its Logic and DRAM segments, as global semiconductor companies compete to innovate in logic, compute memory, and packaging for AI workloads [1][2] Group 1: Demand and Growth Drivers - The demand for fabrication, patterning, and advanced packaging systems is on the rise, creating significant opportunities for AMAT [2] - Technologies such as next-generation gate-all-around transistors, backside power delivery, 4F2, and 3D DRAM are expected to further propel AMAT's growth in AI workloads [2] - AMAT's Sym3 Magnum etch system has generated over $1.2 billion in revenue since its launch in February 2024, highlighting its importance in developing high-aspect-ratio structures for AI and HPC workloads [3][9] - Advanced DRAM revenues are projected to grow over 40% in fiscal 2025, driven by increased demand for DDR5 and high-bandwidth memory used in AI applications [4][9] Group 2: Competitive Landscape - Lam Research's memory segment saw a nearly 24% year-over-year revenue increase to $1.31 billion in Q3 fiscal 2025, driven by AI-related chip demand [5] - KLA Corporation's advanced packaging solutions are also benefiting from the AI boom, with projections indicating its advanced packaging business will grow from $500 million in 2024 to $850 million in 2025 [6] Group 3: Financial Performance and Valuation - AMAT's shares have increased by 19.9% year-to-date, outperforming the Electronics - Semiconductors industry, which grew by 13.3% [7] - The company trades at a forward price-to-sales ratio of 5.23X, which is lower than the industry average of 8.6X, indicating potential valuation upside [10] - The Zacks Consensus Estimate for AMAT's fiscal 2025 and 2026 earnings suggests year-over-year growth of 9.48% and 5.60%, respectively, with upward revisions in estimates for fiscal 2026 and 2027 over the past 60 days [13]