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AI Gold Rush or Earnings Trap: Buy Applied Materials Stock as its Q2 Results Approach?
Applied Materials (AMAT - Free Report) ) has quietly become one of Wall Street’s hottest AI infrastructure plays.
While investors often obsess over chipmakers like Nvidia (NVDA - Free Report) ) and AMD (AMD - Free Report) ), Applied Materials sits deeper in the semiconductor supply chain — selling the critical equipment used to manufacture the advanced chips powering artificial intelligence, cloud computing, and high-performance data centers.
With results for Applied Materials' fiscal second quarter approaching after-market hours on Thursday, May 14, investors are asking a crucial question: Is AMAT still a buy after its massive rally, or is the stock pricing in too much optimism?
Image Source: Zacks Investment Research
Applied Materials Is Quietly Controlling the AI Gold Rush
Applied Materials is one of the largest semiconductor equipment makers in the world, with its technology helping companies like Taiwan Semiconductor (TSM - Free Report) ), Intel (INTC - Free Report) ), and Micron Technology (MU - Free Report) ) build increasingly sophisticated chips.
That positioning has turned AMAT into a major beneficiary of the AI spending explosion.
This comes as demand for advanced packaging, DRAM memory, and high-bandwidth memory (HBM) has continued to accelerate. Furthermore, analysts increasingly believe semiconductor capital expenditures could remain elevated through 2027 as hyperscalers and chipmakers race to build AI infrastructure.
Keeping this in mind, AMAT has surged nearly 70% year to date and more than 250% in the last three years, making it one of the standout winners in the broader semiconductor rally.
Applied Materials Q2 Expectations
Based on Zacks estimates, Applied Materials Q2 sales are thought to have increased 8% year over year to $7.69 billion from $7.1 billion a year ago. On the bottom line, Q2 EPS is expected to be up 12% to $2.68 versus $2.39 per share in the comparative quarter.
Applied Materials has surpassed sales estimates in three of its last four quarterly reports, with an average sales surprise of 1.11%. More intriguing, AMAT has exceeded the Zacks EPS Consensus for 15 consecutive quarters with an average earnings surprise of 5.24% over the last four quarters.
Image Source: Zacks Investment Research
It’s also noteworthy that the Zacks ESP (Expected Surprise Prediction) indicates Applied Materials could once again surpass earnings expectations, with the Most Accurate and recent estimate among Wall Street analysts having Q2 EPS pegged at $2.77 and 3% above the underlying Zacks Consensus (Current Qtr below).
Image Source: Zacks Investment Research
Monitoring AMAT’s P/E Valuation
What may be most reassuring to investors is that Applied Materials stock is still trading at a slight discount to its Zacks Electronics-Semiconductors Industry average of 40X forward earnings and isn’t at an overly stretched premium to the benchmark S&P 500’s 23X.
Image Source: Zacks Investment Research
Bottom Line
Applied Materials may not have the headline glamour of Nvidia or other chipmakers, but behind the scenes, the company is building the foundation of the AI economy, and that could keep its growth story alive well beyond this quarter’s earnings report.
Being well-positioned for AI infrastructure plays, Applied Materials still looks like one of the strongest picks in the semiconductor landscape, especially for long-term investors. At the moment, AMAT sports a Zacks Rank #2 (Buy) based on a trend of positive EPS revisions.
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AI Gold Rush or Earnings Trap: Buy Applied Materials Stock as its Q2 Results Approach?
Applied Materials (AMAT - Free Report) ) has quietly become one of Wall Street’s hottest AI infrastructure plays.
While investors often obsess over chipmakers like Nvidia (NVDA - Free Report) ) and AMD (AMD - Free Report) ), Applied Materials sits deeper in the semiconductor supply chain — selling the critical equipment used to manufacture the advanced chips powering artificial intelligence, cloud computing, and high-performance data centers.
With results for Applied Materials' fiscal second quarter approaching after-market hours on Thursday, May 14, investors are asking a crucial question: Is AMAT still a buy after its massive rally, or is the stock pricing in too much optimism?
Image Source: Zacks Investment Research
Applied Materials Is Quietly Controlling the AI Gold Rush
Applied Materials is one of the largest semiconductor equipment makers in the world, with its technology helping companies like Taiwan Semiconductor (TSM - Free Report) ), Intel (INTC - Free Report) ), and Micron Technology (MU - Free Report) ) build increasingly sophisticated chips.
That positioning has turned AMAT into a major beneficiary of the AI spending explosion.
This comes as demand for advanced packaging, DRAM memory, and high-bandwidth memory (HBM) has continued to accelerate. Furthermore, analysts increasingly believe semiconductor capital expenditures could remain elevated through 2027 as hyperscalers and chipmakers race to build AI infrastructure.
Keeping this in mind, AMAT has surged nearly 70% year to date and more than 250% in the last three years, making it one of the standout winners in the broader semiconductor rally.
Applied Materials Q2 Expectations
Based on Zacks estimates, Applied Materials Q2 sales are thought to have increased 8% year over year to $7.69 billion from $7.1 billion a year ago. On the bottom line, Q2 EPS is expected to be up 12% to $2.68 versus $2.39 per share in the comparative quarter.
Applied Materials has surpassed sales estimates in three of its last four quarterly reports, with an average sales surprise of 1.11%. More intriguing, AMAT has exceeded the Zacks EPS Consensus for 15 consecutive quarters with an average earnings surprise of 5.24% over the last four quarters.
Image Source: Zacks Investment Research
It’s also noteworthy that the Zacks ESP (Expected Surprise Prediction) indicates Applied Materials could once again surpass earnings expectations, with the Most Accurate and recent estimate among Wall Street analysts having Q2 EPS pegged at $2.77 and 3% above the underlying Zacks Consensus (Current Qtr below).
Image Source: Zacks Investment Research
Monitoring AMAT’s P/E Valuation
What may be most reassuring to investors is that Applied Materials stock is still trading at a slight discount to its Zacks Electronics-Semiconductors Industry average of 40X forward earnings and isn’t at an overly stretched premium to the benchmark S&P 500’s 23X.
Image Source: Zacks Investment Research
Bottom Line
Applied Materials may not have the headline glamour of Nvidia or other chipmakers, but behind the scenes, the company is building the foundation of the AI economy, and that could keep its growth story alive well beyond this quarter’s earnings report.
Being well-positioned for AI infrastructure plays, Applied Materials still looks like one of the strongest picks in the semiconductor landscape, especially for long-term investors. At the moment, AMAT sports a Zacks Rank #2 (Buy) based on a trend of positive EPS revisions.