Applied Materials Is a Buy on Surging AI Demand and US Chip Expansion

Applied Materials Inc. (AMAT) remains a leader in the semiconductor equipment industry. The company has shown strong profitability growth over the past decades, driven by the expansion of the semiconductor and AI industries. Despite the risks posed by geopolitical tensions and trade disruptions, the company is well-positioned to navigate uncertainty. This article analyses the fundamental and technical performance of Applied Materials to understand the stock’s next move.

Quarterly Earnings Show Strength Amid Semiconductor Tailwinds

Applied Materials delivered strong earnings in Q3 2025. The revenue increased 8% year-over-year, reaching $7.302 billion, driven by robust demand across the semiconductor industry. The chart below highlights strong growth in annual and quarterly revenue, underscoring the company’s consistent performance.

Moreover, the company achieved a gross profit margin of 48.78%, reflecting strong pricing power and operational efficiency. Operating margins also remained solid at 30.58%, highlighting disciplined cost control despite a challenging global environment. These results marked the sixth consecutive year of revenue growth, underscoring the company’s resilience.

The management noted that macroeconomic uncertainty and weaker visibility in China pose risks to near-term performance. A revenue decline is expected in Q4 2025, driven by capacity digestion in China and uneven demand from leading-edge customers due to fab timing.

Applied Materials forecasts total revenue of $6.7 billion in Q4, with a gross margin of 48.1% and diluted EPS of $2.11. These expectations suggest a softer quarter ahead, but management emphasised strong confidence in long-term growth. Applied’s robust supply chain, global manufacturing scale, and deep customer relationships support this outlook.

The difference between the record-breaking Q3 results and Q4 guidance highlights the cyclical nature of the semiconductor industry. Applied Materials is navigating short-term headwinds while leveraging its structural strengths to capture future growth opportunities in advanced process technologies and capacity expansions. This strategic positioning provides a foundation for sustained long-term value creation, even during temporary slowdowns.

AI, Advanced Packaging, and US Chip Investment Fuels Future Growth

Applied Materials is positioned to benefit from several powerful structural and technological tailwinds. The company is actively investing in US semiconductor infrastructure to support national supply chain resilience. It is currently building a new components facility in Arizona with over $200 million in investments. This brings the total investment in US infrastructure to more than $400 million over the last five years. Applied Materials is strengthening its domestic footprint as the largest US manufacturer of semiconductor equipment by establishing strategic locations across California, Arizona, Texas, Montana, and Massachusetts.

Its leadership in materials engineering also supports growth and enables energy-efficient computing. Applied aligns its strategy with five key AI data centre enablers: leading-edge logic, high-performance DRAM, DRAM die stacking, advanced packaging, and power electronics. It holds leadership in nearly all these categories, particularly in gate-all-around transistors, 3D DRAM, substrates, and compound semiconductors like silicon carbide (SiC) and gallium nitride (GaN). This positions the company to grow its share of the wafer fabrication equipment (WFE) market as these technologies become more dominant.

Emerging Technologies and Near-Term Demand Catalysts

Several near-term inflections are driving demand across multiple segments. For leading-edge logic, the adoption of Gate-All-Around and Backside Power Delivery increases opportunity by 30%. The company expects to surpass a 50% share of the SAM, with over $1.2 billion in Q3 revenue from metal deposition. In high-performance DRAM, revenue from leading-edge customers is projected to grow 50% in FY25. The segment already drove record results in Q3 and is seeing broader adoption of VT 4F².

Applied’s advanced packaging business is also scaling rapidly. Applied Materials targets High-Bandwidth Memory (HBM) and heterogeneous integration with a diverse portfolio and aims to more than double its business to over $3 billion. The power electronics market is projected to reach $9 billion by 2030. Applied is on track to grow its share here through differentiated GaN solutions.

These initiatives form a robust set of growth drivers that will support Applied Materials through near-term volatility and long-term industry transformation.

Bullish Technical Patterns Signal Upside in Applied Materials Stock

Long-Term Breakout Suggests Renewed Bullish Momentum

The long-term outlook for Applied Materials remains strongly bullish, as shown in the quarterly chart below. The chart reveals that the stock price formed a long-term bottom between 2000 and 2020. A decisive breakout in Q4 2020 pushed the price above the bull-bear line, triggering a decisive upward move that peaked at $167.06 in Q1 2022.

Following this high, the stock entered a corrective phase, falling back toward the bull-bear line and marking a low of $71.12 in Q4 2022. This correction produced a strong buy signal, confirmed by the formation of a bullish hammer candle. The signal ignited a sharp rally, propelling the stock to a new all-time high of $255.89 in Q3 2024.

After this record, the stock corrected again, marking a low of $123.74 in Q2 2025. Notably, another bullish hammer candle formed at this level, suggesting renewed bullish momentum. The price action shows a recurring pattern of strong surges following corrections, indicating that a significant bottom was likely established in 2025.

This repeated pattern suggests that a fresh rally is now underway, with potential for the stock to break above its previous record highs in the upcoming quarters.

Wedge Pattern Points to Higher Price Targets

To better understand the long-term price action in Applied Materials, the monthly chart below highlights the formation of an ascending broadening wedge pattern. This pattern suggests that the stock has been trading within expanding price swings since 2019, indicating increasing volatility over time.

Key buy signals have emerged at the lower support trendline of this wedge. These buy signals are observed in March 2020, October 2022, and April 2025. Each of these signals coincided with a bullish hammer candle, reinforcing the idea of substantial accumulation and upward reversals at key support levels.

The bullish hammer in April 2025 is similar to that in October 2022, which triggered a strong upward move to mark a record high. Based on this recurring behaviour, the stock price is likely to continue its rally toward new record highs. The upper resistance of the broadening wedge currently lies in the $300–$350 range, which serves as the potential target zone for the next significant rally in the coming months.

Fibonacci Support Levels Strengthen Bullish Case for Applied Materials

The key levels in Applied Materials stock can be identified using the monthly chart below. The recent correction in 2025 retraced to the 50% Fibonacci level near the $132 area. However, the latest rebound in September 2025 occurred from the 38.2% Fibonacci retracement level around $160.

This price action indicates that Applied Materials is forming strong support around key Fibonacci levels, which reinforces the bullish outlook and suggests further strength in the stock price ahead.

Moreover, the weekly chart below shows that Applied Materials has formed a strong bullish price structure since the 2018 low. As discussed above, the stock has been trading within an ascending broadening wedge pattern. The stock has formed an inverted head and shoulders pattern within the ascending broadening wedge. These inverted head and shoulders are observed in the weekly chart below.

The most recent inverted head and shoulders pattern formed with the head at the April 2025 low. Consequently, a breakout above the neckline of this pattern, in the $200 to $215 area, would confirm a bullish reversal and likely trigger a strong surge in Applied Materials’ stock price.

Market Risks

Despite strong long-term fundamentals, Applied Materials faces significant short-term risks. The company expects a decline in revenue in Q4 2025 due to soft demand in China and the digestion of recent capacity expansions. These factors may continue to pressure near-term financial performance and investor sentiment.

Global macroeconomic uncertainty also adds to the risk landscape. Persistent inflation, tighter financial conditions, and potential slowdowns in global tech spending could impact demand for semiconductor equipment. On the other hand, Applied Materials benefits from broad customer diversification. Any slowdown in capital expenditure from major chipmakers may weigh on revenue and margins.

Geopolitical tensions and trade restrictions further complicate the outlook. The US–China technology conflict could disrupt supply chains or limit the company’s access to key growth markets. Additionally, export controls or regulatory changes might delay equipment shipments from international customers. These external shocks could temporarily derail Applied’s growth momentum despite its strong structural positioning.

Bottom Line

Applied Materials continues to show strength in financial and technical performance. The company posted strong Q3 results with solid margins and steady revenue growth. Despite short-term risks in China and weaker near-term visibility, the long-term outlook remains positive. Industry tailwinds, including AI, advanced packaging, and power electronics, position the company to benefit significantly.

Ongoing investments in US manufacturing, combined with leadership in critical semiconductor technologies, support future growth. As the market digests near-term volatility, Applied Materials stands ready to lead the next phase of semiconductor innovation and value creation.

From a technical perspective, the stock has established a strong support level at the 38.2% Fibonacci retracement level, around $160. It has also formed an inverted head-and-shoulders pattern at this support. This pattern suggests that a breakout above the $200–$215 neckline could trigger a strong surge in the stock price. Therefore, investors may consider buying on any pullback and look for solid growth potential in the coming months.