7 January 2026 | 9:09PM HKT Equity Research AMEC (688012.SS): China Semis Tour: Advanced node capacity expansion to drive growth; Migrating to platform solution; Buy We hosted AMEC management during our China Semis Tour in Shanghai on Jan 7. Key discussions focused on (1) product development progress, (2) competition edges; (3) logic/ memory end demand. Overall, management is positive on the rising demand from advanced logic, NAND and DRAM in the long term, driven by capacity expansion of advanced node, alt ...

Core Viewpoint - Applied Materials is well-positioned to benefit from the increasing capital expenditures driven by the generative artificial intelligence boom, with potential for its stock to reach around $380 in the coming years [2][10]. Group 1: Market Trends and Growth Potential - Capital spending on advanced chip manufacturing equipment is expected to nearly double from 2023 to 2028, with global expenditures anticipated to exceed $100 billion in 2025 [3]. - The company has experienced a robust annual revenue growth rate of 13% over the last five years, with projections of reaching $29 billion in FY'25, and potential growth to approximately $53 billion by FY'28, representing an increase of roughly 81% [4][9]. - The surge in generative AI is driving a significant increase in semiconductor demand, necessitating advanced manufacturing processes for AI chips, which Applied Materials specializes in [5]. Group 2: Competitive Positioning - Applied Materials serves major clients such as TSMC, Samsung, and Intel, positioning it as a central player in both the logic and memory sectors of the chip market [3]. - The company has a considerable exposure to China, which accounted for over a third of its revenue in FY'24, but recent trade agreements may improve access to this essential growth market [6]. Group 3: Financial Performance and Projections - The adjusted net margins of Applied Materials have increased from 19.6% in FY'19 to 26.5% in FY'24, with expectations to rise to approximately 31% by FY'28 due to a focus on new technologies and effective cost management [9]. - If earnings grow by 2.2 times over the next few years, the P/E ratio could stabilize around 18x, potentially doubling the stock price from $190 to roughly $380 [10].