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TER vs. AMAT: Which AI Semiconductor Stock Is the Better Buy?
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Key Takeaways
Teradyne is seeing AI demand near 70% of Q1 2026 revenues, up from about 60% in the prior quarter.
TER expanded AI test offerings with a TEL partnership for chiplet-based 2.5D and 3D architectures.
AMAT expects more than 80% of 2026 WFE growth from leading-edge logic, DRAM and packaging.
Teradyne (TER - Free Report) and Applied Materials (AMAT - Free Report) are major players in the semiconductor market. While Teradyne focuses on semiconductor test equipment and automation solutions, Applied Materials specializes in semiconductor manufacturing equipment used to fabricate advanced chips.
So, TER or AMAT — Which of these Semiconductor stocks has the greater upside potential? Let’s find out.
The Case for TER Stock
Teradyne is benefiting from the growing demand for AI infrastructure, which is driving robust growth across its semiconductor test and robotics divisions. Growth is largely attributed to the accelerating demand for AI and data center technologies, with AI-related demand accounting for nearly 70% of Teradyne’s revenues in the first quarter of 2026, up from about 60% in the previous quarter.
The company’s product innovation is supporting its growth. Teradyne’s introduction, like the Photon 100 platform for silicon photonics and co-packaged optics testing and the Omnyx production board test platform, addresses critical needs in AI data center build-outs. The Photon 100 is expected to contribute to a TAM expansion opportunity that could reach $300 million to $700 million per year over the midterm.
Teradyne’s expanding portfolio has been noteworthy. The company recently announced a known good device screening test cell solution. This solution was developed in partnership with Tokyo Electron (TEL) for AI and data center semiconductor applications. It combines Teradyne’s UltraFLEXplus test platform with TEL’s Prexa SDP prober. This combination allows for high-quality device screening across advanced packaging flows.
The solution is designed for chiplet-based 2.5D and 3D architectures. It helps improve yield, boost reliability, and lower integration risks in high-volume manufacturing. Its open ecosystem architecture provides flexibility for integration with various probe cards, manipulators and interface technologies.
The Case for AMAT Stock
Applied Materials is emerging as one of the biggest beneficiaries of the AI-driven semiconductor investment cycle. The company is seeing AI adoption broaden and diversify, which is pushing wafer fab equipment spending toward leading-edge foundry-logic, DRAM and advanced packaging. Management expects these three areas to drive more than 80% of year-over-year total WFE growth in calendar 2026, a trend likely to persist into 2027.
AMAT’s innovative product portfolio has been noteworthy. In the second quarter of fiscal 2026, the company introduced new products like Trillium ALD and Precision Selective Nitride PECVD. These products aim to improve transistor performance, lower power consumption and support Gate-All-Around manufacturing. With the growing demand for AI infrastructure worldwide, AMAT is likely to expand its reach in 2026 and beyond.
Advanced packaging represents another significant long-term growth driver. As AI processors get more complex and diverse, chipmakers are relying more heavily on 3D chiplet architectures, HBM integration and advanced packaging technologies to boost performance and energy efficiency. Applied Materials anticipates that packaging revenues will increase by more than 50% in 2026.
The company’s new partnerships and collaborations with major industry players such as TSMC, Samsung, SK hynix and Micron have been noteworthy. In the second quarter of fiscal 2026, AMAT announced an innovation partnership with TSMC at its EPIC Center in Silicon Valley to accelerate the development and commercialization of next-generation semiconductor technologies for AI through advances in materials engineering, equipment innovation and process integration.
Price Performance and Valuation of TER and AMAT
In the trailing 12-month period, shares of Teradyne and AMAT have skyrocketed 373.6% and 243%, respectively. The outperformance in Teradyne can be attributed to strong AI-related demand, which is driving significant investments in cloud AI build-out as customers accelerate production of a wide range of AI accelerators, networking, memory and power devices.
Despite AMAT’s expanding portfolio, the company is suffering from high China exposure amid changing export rules, the inherently cyclical nature of capital spending and intense competition across the semiconductor market.
TER and AMAT Stock Performance
Image Source: Zacks Investment Research
Valuation-wise, Teradyne and AMAT shares are currently overvalued, as suggested by a Value Score of F.
In terms of forward 12-month Price/Sales, TER shares are trading at 12.93X, higher than AMAT’s 12.19X.
TER and AMAT Valuation
Image Source: Zacks Investment Research
How Do Earnings Estimates Compare for TER & AMAT?
The Zacks Consensus Estimate for TER’s 2026 earnings is pegged at $7.09 per share, which has been unchanged over the past 30 days. This indicates a 79.04% increase year over year.
The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $12.10 per share, which has increased 2.19% over the past 30 days. This indicates a 28.45% increase year over year.
Teradyne earnings beat the Zacks Consensus Estimate in all the trailing four quarters, delivering an average surprise of 17.05%. Applied Materials earnings beat the Zacks Consensus Estimate in all the trailing four quarters, delivering an average surprise of 6.06%. The average surprise of Teradyne is higher than that of Applied Materials.
Conclusion
While both Teradyne and Applied Materials are well-positioned to benefit from the AI-driven semiconductor upcycle, Teradyne appears to offer greater upside potential due to its stronger AI exposure, faster earnings growth outlook and expanding opportunities in semiconductor testing and advanced packaging.
Despite AMAT’s expanding product portfolio and solid earnings outlook, the company faces headwinds from its significant exposure to China, evolving export restrictions and the cyclical nature of wafer fabrication spending, which could limit its near-term upside potential.
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TER vs. AMAT: Which AI Semiconductor Stock Is the Better Buy?
Key Takeaways
Teradyne (TER - Free Report) and Applied Materials (AMAT - Free Report) are major players in the semiconductor market. While Teradyne focuses on semiconductor test equipment and automation solutions, Applied Materials specializes in semiconductor manufacturing equipment used to fabricate advanced chips.
So, TER or AMAT — Which of these Semiconductor stocks has the greater upside potential? Let’s find out.
The Case for TER Stock
Teradyne is benefiting from the growing demand for AI infrastructure, which is driving robust growth across its semiconductor test and robotics divisions. Growth is largely attributed to the accelerating demand for AI and data center technologies, with AI-related demand accounting for nearly 70% of Teradyne’s revenues in the first quarter of 2026, up from about 60% in the previous quarter.
The company’s product innovation is supporting its growth. Teradyne’s introduction, like the Photon 100 platform for silicon photonics and co-packaged optics testing and the Omnyx production board test platform, addresses critical needs in AI data center build-outs. The Photon 100 is expected to contribute to a TAM expansion opportunity that could reach $300 million to $700 million per year over the midterm.
Teradyne’s expanding portfolio has been noteworthy. The company recently announced a known good device screening test cell solution. This solution was developed in partnership with Tokyo Electron (TEL) for AI and data center semiconductor applications. It combines Teradyne’s UltraFLEXplus test platform with TEL’s Prexa SDP prober. This combination allows for high-quality device screening across advanced packaging flows.
The solution is designed for chiplet-based 2.5D and 3D architectures. It helps improve yield, boost reliability, and lower integration risks in high-volume manufacturing. Its open ecosystem architecture provides flexibility for integration with various probe cards, manipulators and interface technologies.
The Case for AMAT Stock
Applied Materials is emerging as one of the biggest beneficiaries of the AI-driven semiconductor investment cycle. The company is seeing AI adoption broaden and diversify, which is pushing wafer fab equipment spending toward leading-edge foundry-logic, DRAM and advanced packaging. Management expects these three areas to drive more than 80% of year-over-year total WFE growth in calendar 2026, a trend likely to persist into 2027.
AMAT’s innovative product portfolio has been noteworthy. In the second quarter of fiscal 2026, the company introduced new products like Trillium ALD and Precision Selective Nitride PECVD. These products aim to improve transistor performance, lower power consumption and support Gate-All-Around manufacturing. With the growing demand for AI infrastructure worldwide, AMAT is likely to expand its reach in 2026 and beyond.
Advanced packaging represents another significant long-term growth driver. As AI processors get more complex and diverse, chipmakers are relying more heavily on 3D chiplet architectures, HBM integration and advanced packaging technologies to boost performance and energy efficiency. Applied Materials anticipates that packaging revenues will increase by more than 50% in 2026.
The company’s new partnerships and collaborations with major industry players such as TSMC, Samsung, SK hynix and Micron have been noteworthy. In the second quarter of fiscal 2026, AMAT announced an innovation partnership with TSMC at its EPIC Center in Silicon Valley to accelerate the development and commercialization of next-generation semiconductor technologies for AI through advances in materials engineering, equipment innovation and process integration.
Price Performance and Valuation of TER and AMAT
In the trailing 12-month period, shares of Teradyne and AMAT have skyrocketed 373.6% and 243%, respectively. The outperformance in Teradyne can be attributed to strong AI-related demand, which is driving significant investments in cloud AI build-out as customers accelerate production of a wide range of AI accelerators, networking, memory and power devices.
Despite AMAT’s expanding portfolio, the company is suffering from high China exposure amid changing export rules, the inherently cyclical nature of capital spending and intense competition across the semiconductor market.
TER and AMAT Stock Performance
Image Source: Zacks Investment Research
Valuation-wise, Teradyne and AMAT shares are currently overvalued, as suggested by a Value Score of F.
In terms of forward 12-month Price/Sales, TER shares are trading at 12.93X, higher than AMAT’s 12.19X.
TER and AMAT Valuation
Image Source: Zacks Investment Research
How Do Earnings Estimates Compare for TER & AMAT?
The Zacks Consensus Estimate for TER’s 2026 earnings is pegged at $7.09 per share, which has been unchanged over the past 30 days. This indicates a 79.04% increase year over year.
Teradyne, Inc. Price and Consensus
Teradyne, Inc. price-consensus-chart | Teradyne, Inc. Quote
The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $12.10 per share, which has increased 2.19% over the past 30 days. This indicates a 28.45% increase year over year.
Applied Materials, Inc. Price and Consensus
Applied Materials, Inc. price-consensus-chart | Applied Materials, Inc. Quote
Teradyne earnings beat the Zacks Consensus Estimate in all the trailing four quarters, delivering an average surprise of 17.05%. Applied Materials earnings beat the Zacks Consensus Estimate in all the trailing four quarters, delivering an average surprise of 6.06%. The average surprise of Teradyne is higher than that of Applied Materials.
Conclusion
While both Teradyne and Applied Materials are well-positioned to benefit from the AI-driven semiconductor upcycle, Teradyne appears to offer greater upside potential due to its stronger AI exposure, faster earnings growth outlook and expanding opportunities in semiconductor testing and advanced packaging.
Despite AMAT’s expanding product portfolio and solid earnings outlook, the company faces headwinds from its significant exposure to China, evolving export restrictions and the cyclical nature of wafer fabrication spending, which could limit its near-term upside potential.
Currently, Teradyne sports a Zacks Rank #1 (Strong Buy), making the stock a stronger pick than Applied Materials, which has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.