AMAT Stock Rises 39% in 3 Months: Should You Buy, Sell or Hold?

Core Insights - Applied Materials (AMAT) stock has increased by 39% over the past three months, slightly outperforming the Zacks Electronics - Semiconductors industry's growth of 38.7% [6][1] - AMAT's current forward 12-month price-to-earnings (P/E) ratio is 24.00X, which is lower than the industry average of 37.17X, indicating a potentially undervalued position [4][6] Group 1: Growth Drivers - The demand for AI infrastructure is driving AMAT's top-line growth, with the company introducing three new semiconductor manufacturing systems aimed at supporting next-generation AI chips [8] - AMAT's Logic and DRAM segments are experiencing growth due to the rising demand for AI infrastructure, with DRAM revenues increasing approximately 50% year-over-year in Q3 of fiscal 2025, surpassing $1 billion in etch sales [10][9] - The company is ramping up R&D investments, including the establishment of a new research center expected to be operational by 2026, and is collaborating with organizations to enhance its R&D capabilities [11] Group 2: Financial Performance - AMAT's non-GAAP operating margin expanded by 190 basis points in Q3 of fiscal 2025, aided by a reduction in general and administrative expenses to offset rising R&D costs [12] - The Zacks Consensus Estimate for fiscal 2025 earnings has been revised downward by 2 cents in the past 30 days, reflecting analysts' concerns over the company's future performance [19] Group 3: Market Challenges - Increasing U.S.-China tensions and export restrictions on semiconductor manufacturing equipment pose significant challenges for AMAT, as China is a crucial market for the company [13][15] - The broader semiconductor market is recovering, but memory markets, including DRAM and NAND, remain weak, with expectations of only gradual recovery in memory-related semiconductor demand in 2025 [16] - Competition from other players in the semiconductor supply chain, such as KLA Corporation, Lam Research, and ASML Holding, is also a concern for AMAT [16][18] Group 4: Conclusion - Despite the rise in share price and potential undervaluation, weak fundamentals and macroeconomic headwinds lead to a recommendation for investors to hold AMAT stock for now [20]