Can Applied Materials Sustain Its Growth Amid AI-Driven Demand?

Applied Materials AMAT has been at the forefront of the wafer fabrication equipment space, driven by the rapid build-out of AI computing infrastructure, which is increasing the demand for higher system performance, power efficiency and cost optimization. In the advanced packaging space, AMAT has strong positions in high-bandwidth memory and 3D chiplet stacking.

In July 2026, Applied Materials introduced a suite of semiconductor manufacturing systems to accelerate next-generation AI chip production, particularly for HBM and advanced 3D packaging. The company launched an enhanced epitaxy system for DRAM, improving transistor performance and efficiency while reducing the fab footprint by 20%.

Three new CMP, copper deposition and PECVD systems target critical advanced-packaging processes, improving stacking yield and enabling higher-layer HBM designs. AMAT also introduced two eBeam metrology and defect-analysis systems for increasingly complex packaging substrates.

Overall, the launches strengthen Applied Materials’ positioning across DRAM, HBM, advanced packaging and process control as AI-driven semiconductor complexity rises. Applied Materials’ advanced packaging, along with leading-edge foundry-logic and DRAM, is expected to account for more than 80% of the year-over-year growth in wafer fab equipment spending in 2026.

AMAT is expected to gain tremendously as the data center memory space remains among the most supply-constrained markets amid massive demand. The eventual ramp-up of memory chip production gives AMAT an edge throughout 2026 and 2027, as it is a leading process equipment supplier in advanced packaging. Applied Materials now expects advanced packaging revenues to grow more than 70% in 2026.

How Competitors Fare Against AMAT

AMAT’s broad portfolio positions the company to capture a larger share of customer spending as semiconductor manufacturing becomes increasingly materials-intensive while also keeping its competitors like Lam Research LRCX and Camtek CAMT at bay. The breadth of Applied Materials' portfolio also reduces its dependence on any single semiconductor technology cycle and supports stronger pricing power.

Lam Research competes with Applied Materials in deposition and etch technologies, including advanced atomic layer deposition systems for leading-edge semiconductor manufacturing. Camtek focuses on semiconductor inspection, metrology, advanced packaging and high-performance computing applications.

AMAT’s Price Performance, Valuation and Estimates

Shares of Applied Materials have surged 91.1% year to date compared with the Zacks Electronics - Semiconductors industry’s growth of 25.4%.

AMAT YTD Performance Chart

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From a valuation standpoint, Applied Materials trades at a forward price-to-sales ratio of 11.08X, higher than the industry’s average of 9.53X.

AMAT Forward 12-Month (P/S) Valuation Chart

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The Zacks Consensus Estimate for Applied Materials’ fiscal 2026 and 2027 earnings implies year-over-year growth of 35% and 43%, respectively. Earnings estimates for fiscal 2026 and 2027 have been revised upward over the past seven days.

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Applied Materials currently flaunts a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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