The semiconductor equipment manufacturer Applied Materials is experiencing a remarkable stock rally, propelled by the artificial intelligence revolution. While geopolitical headwinds and trade restrictions in China present ongoing challenges, surging demand for AI-related technologies is driving the company to unprecedented performance levels. Market observers are now questioning whether this impressive momentum can be sustained.
AI Chip Demand Offsets Geopolitical Pressures
Artificial intelligence has emerged as a powerful growth catalyst for Applied Materials, creating substantial demand for advanced semiconductor manufacturing equipment. The company has strategically positioned itself in key growth segments benefiting from this technological shift, including leading-edge logic chips, DRAM, and sophisticated packaging solutions. Industry experts point to sustained investment in AI-powered data centers as a primary driver that will continue to fuel semiconductor industry expansion in the coming years.
This AI-driven momentum comes despite significant challenges in the Chinese market, where trade restrictions have more than doubled during 2025, now affecting over 20% of China’s wafer fabrication equipment market. The company’s exposure to China has diminished, with the region’s contribution to overall revenue declining to 25% last quarter. Management anticipates further weakening of Chinese investments throughout 2026.
Record Financial Performance Amid Market Challenges
Applied Materials delivered exceptional financial results for fiscal year 2025, establishing new benchmarks with $28.37 billion in total revenue and earnings of $9.42 per share. The company’s fourth quarter performance exceeded expectations, generating $6.8 billion in revenue with profits reaching $2.17 per share.
Should investors sell immediately? Or is it worth buying Applied Materials?
Looking ahead, company leadership projects current quarter revenue of approximately $6.85 billion and earnings around $2.18 per share. The semiconductor equipment segment is expected to experience stagnation through the first half of 2026 before resuming significant growth in the latter half of the year.
Divergent Analyst Perspectives
Market analysts display mixed sentiment toward Applied Materials despite the stock’s impressive nearly 40% surge over the past 90 days. Recent downgrades from institutions including DZ Bank and Craig-Hallum contrast with other firms that have either raised or maintained their price targets. These conflicting assessments reflect the complex market dynamics currently shaping the semiconductor equipment sector.
The critical question facing investors is whether Applied Materials can sufficiently leverage the AI trend to overcome its China-related challenges. Forthcoming quarterly results will determine if the company’s current upward trajectory represents sustainable growth or temporary market enthusiasm.
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