AMAT Stock Rises 42.3% in 6 Months: Should You Buy, Sell or Hold?

Core Insights - Applied Materials (AMAT) stock has increased by 42.2% over the past six months, outperforming the Zacks Electronics - Semiconductors industry's growth of 39.4% [1] - The stock is currently trading above its 200-day and 50-day moving averages, indicating a bullish trend [4] Business Performance - AMAT's recent stock surge is attributed to strong demand for AI-based products and growing needs in DRAM and advanced packaging [7][8] - The company has launched three new AI-focused products, including the Kinex Bonding System, Centura Xtera Epi System, and PROVision 10 eBeam Metrology System [8] - AMAT anticipates that its leading-edge foundry, logic, DRAM, and high bandwidth memory sectors will be the fastest-growing wafer fabrication equipment businesses by 2026, driven by AI infrastructure expansion [9] - DRAM revenues from leading-edge customers increased by over 50% in 2025 [9] - The advanced packaging business, currently valued at $1.5 billion, is expected to double to $3 billion in the coming years due to high bandwidth memory demand [10] Strategic Developments - AMAT is restructuring its pricing program, which is projected to contribute significantly to gross margin expansion in the upcoming fiscal year [10] - The company is increasing its R&D investments and establishing the Equipment and Process Innovation and Commercialization center, expected to be operational by 2026 [11] Market Challenges - Increasing U.S.-China tensions and export restrictions on semiconductor manufacturing equipment pose significant challenges for AMAT, particularly as China is a crucial market [12] - The memory markets, including DRAM and NAND, remain weak, with only a gradual recovery expected in 2025, which may impact AMAT's revenue growth [13] - Competition from companies like KLA Corp., Lam Research, and ASML Holding is also a concern for AMAT [13][14][15] Earnings Outlook - Analysts have recently lowered earnings estimates for fiscal 2026, with the Zacks Consensus Estimate revised downward by a penny in the past week [16] - Current earnings estimates for the upcoming quarters and years are as follows: - Current Qtr (1/2026): $2.21 - Next Qtr (4/2026): $2.26 - Current Year (10/2026): $9.51 - Next Year (10/2027): $11.01 [17] Conclusion - Despite current challenges, AMAT has promising long-term prospects due to its advanced wafer fabrication equipment portfolio and growth in DRAM and NAND revenues [18]