Nicholas Mugalli
Institutional TMT & Macro Research, AI/Semiconductors/Policy
Applied Materials' largely fixed cost base could carry operating margins above management's 40% target if revenue approaches the upper scenarios. World Trade Securities sees 40% as a floor despite the step up from 30%; gross margin is guided to 54% and opex to fall from 19% to 14% of revenue. Its upside case uses a 45% margin, lifting 2030 EPS to $32-$47, about $4-$5 above the management framework across scenarios. x.comÂ
Applied Materials' record revenue and Q4 guidance show strong AI equipment demand, and the median analyst target implies 42.9% upside over the next 12 months. x.comÂ
Next-generation AI systems could double wafer demand, keeping the long-term outlook compelling for semiconductor equipment makers. Applied Materials targets more than $12 billion in services revenue and roughly 40% operating margins by 2030; management expects over two points of share gains and potentially more than $5 billion in advanced-packaging revenue, driven by HBM and AI demand. Bullish on Applied Materials, Lam Research, ASML and KLA. x.comÂ
Applied Materials looks expensive against its earnings at $511.75, or 29x next year's earnings, versus the usual 18x for chip-equipment makers. An 18x multiple on forward EPS of $17.91 gives a fair range of $283.64 to $360.99, leaving shares 42% above the high end, and the forward read leans on forecasts 54% above trailing. The view uses levels only, from reported earnings and revenue estimates. x.comÂ
Applied Materials can be bought here as a semiconductor and optics play, with all kinds of upgrades this year and a perfect chart pointing to a $400 target. x.comÂ
Rack-scale AI pods need more wafers and advanced packaging, favoring Applied Materials' equipment portfolio. Applied's slides model two to four times as many wafers per agentic pod; the company says it leads HBM packaging process steps and expects over $2.4 billion in advanced-packaging revenue in 2026. Wiring uses about half of chip power, adding a need for equipment innovation. Applied's WFE share should grow; its optics opportunity depends on scale toward the end of the decade. x.com x.com … Show more
Excess data-center capacity makes Applied Materials look cooked because it is mainly tied to DRAM-manufacturing equipment. x.comÂ
Applied Materials is very likely to reach $630-$660 within a year because AI demand is forcing massive semiconductor capex, and each new fab expansion usually brings it more orders. HBM memory is constrained, and the company benefits across the ecosystem rather than relying on one product, making the most critical tools for chipmaking. Heavy options flow just hit calls at those strikes, 50%+ out of the money. x.comÂ
Lam Research's non-China demand growth and steady earnings estimates make its lower multiple a rebound setup if its guide holds. China's revenue share fell from 43% to 26% as Taiwan and Korea grew, while the fiscal 2027 earnings multiple fell from about 37x to 28x on nearly unchanged estimates. An in-line quarter and December guide near consensus would probably lift the stock; a guide below $8.5bn would back the selloff. x.comÂ
Semiconductor equipment makers such as Applied Materials, KLA and Lam Research look like shorts, a view Michael Burry now shares: per @zerohedge, Burry says he shorted Applied Materials, along with Tesla, Nvidia and, for the first time, Caterpillar. x.comÂ
Applied Materials should benefit from TSMC's massive capex hike, so trading down on the news was ridiculous, and the subsequent rebound was more rational. Over the last three years, every dip like this has been wrong on future fundamentals. x.com x.com x.comÂ
