Applied Materials Is Silently Powering the AI Boom. Here's Why.

Marc Guberti, The Motley Fool

Thu, July 2, 2026 astatine 10:36 AM CDT 3 min read

Nvidia and Micron Technology have drawn important capitalist attraction arsenic they powerfulness AI infrastructure, but savvy investors whitethorn besides privation to crook immoderate of that attraction to Applied Materials (NASDAQ: AMAT). Applied Materials doesn't marque chips, but it designs captious instrumentality that chipmakers usage to make their chips.

In short, Applied Materials is an enabler of chipmakers, but that's not the lone happening you request to cognize erstwhile deciding if the banal is simply a bully buying opportunity.

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Applied Materials isn't the lone institution that produces instrumentality chipmakers request to make their chips, but it is the largest semiconductor instrumentality supplier successful the U.S.

The company's fiscal 2026 second-quarter results highlighted respective lawsuit partnerships that suggest accelerated gross maturation is connected the way. In its release, Applied Materials mentioned agreements and partnerships with Taiwan Semiconductor Manufacturing, Micron, and SK Hynix. All of these companies person been moving unneurotic for years, and the parabolic gross maturation they are seeing should construe into higher gross maturation for Applied Materials.

The institution delivered 11% year-over-year gross maturation successful its fiscal 2026 2nd quarter, which ended April 26, but it expects astatine slightest 30% gross maturation for its semiconductor concern successful calendar 2026. Semiconductor gross made up $5.965 cardinal of the company's $7.91 cardinal of its second-quarter revenue, which comes to 75% of full revenue.

That conception lone had 10.4% year-over-year gross maturation successful the quarter, truthful guidance for 30% gross maturation passim calendar 2026 implies important acceleration successful upcoming quarters.

Applied Materials has an elevated valuation

Not each capitalist is waiting astir for Applied Materials to present astatine slightest 30% gross maturation successful calendar 2026. The banal has much than doubled twelvemonth to date, resulting successful a P/E ratio that soared from the mid-teens conscionable a twelvemonth agone to implicit 50 close now.

While the existent valuation leaves a little borderline of safety, Applied Materials tin acceptable nicely into its caller valuation if it delivers connected guidance. The company's guidance for 30% gross maturation for its semiconductor conception successful calendar 2026 does not mean it volition support a 30% gross maturation complaint for the remainder of the year.