Applied Materials stock dropped by around 8% in Friday’s trading, despite having gained about 3% since the start of 2025. In contrast, Texas Instruments stock, a competitor in the semiconductor sector, has declined by 2% this year. The stock moves in the semiconductor sector are often driven by trends, trends in demand, and the overall performance of global capital markets. This analysis explores the factors contributing to Applied Materials’ recent stock downward movement, its similarities and differences with Texas Instruments, and its potential for future performance.
Key Drivers of Applied Materials’ Recent Movement
Applied Materials, a leading manufacturer of electronic components, reported stronger-than-expected Q1 FY’25 results, with revenue growing by 7% and adjusted earnings expanding 12% year-over-year to $2.38 per share. While its expectations also exceeded, the company’s Q2 revenue forecast of $7.1 billion fell short of expectations due to challenges in its exports. The U.S. government faced tighter restrictions on selling advanced chipmaking equipment to Chinese companies, adding a $400 million revenue loss. Additionally, half of this loss is attributed to difficulties in services segment revenue. Despite the regulatory and demand challenges, the company identified areas of strength, including an increasing demand for high-end equipment used in AI-driven applications.
Applied Materials’Links with AI Opportunities are significant, given the rise of generative AI and the growing emphasis on advanced semiconductor technologies like gate-all-around (GroG) transistors and backside power delivery circuits. These technologies are essential for AI applications in areas such as autonomous vehicles, robotics, and artificial neural networks. The company’s ability to position itself in these markets could potentially drive growth and profitability.
Performance of AMAT’s Past Four Years
Since 2017, the AMAT stock has seen significant volatility compared to the S&P 500. The company ran at 84% in 2021, traded at –38% in 2022, surged to +68% in 2023, and only gained 1% in 2024. The Commercial Arkadaş High Quality Portfolio (HNW) has averaged lower volatility during this period compared to the S&P 500, delivering业绩 that outperforms the benchmark.
Evaluating AMAT’s Underperformance in 2022 and 2024
The analysis highlights a potential same pattern in 2025. Specifically, AMAT underperformed during the 2022 and 2024 quarters due to支撑不变、情绪何等的选择。AMAT’s stock performance has been dictated by the economy’s uncertainty, gas price fluctuations, and geopolitical tensions. With interest rate cuts and geopolitical disputes, the company may face a similar recent slide.
Estimating Applied Materials’ Future Performance
Based on Q1 FY’25 results, we estimate Applied Materials’ stock value at $215 per share, approximately 27% above its current market price. We are in the process of updating our valuation model to reflect Q1 earnings. The future potential of Applied Materials’ stock is strong, driven by its competitive market position in the semiconductor sector and its ability to position itself in AI-driven markets.
Stay Long in the AMAT Decline
Applied Materials stock has shown resilience in times of headwinds, as evidenced by its strong returns during the past four years. With support from growth in semiconductor technology and profit from AI applications, the company has shown resilience. However, the economic uncertainty of 2022 and 2024 poses a continuing risk. By staying long and maintaining a long-term perspective, investors can mitigate some of these risks and capitalize on ongoing opportunities in the sector.
