Is Applied Materials On Its Way To Becoming The Next ASML?

Applied Materials stock (NASDAQ:AMAT), one of the world’s largest suppliers of semiconductor manufacturing equipment, now trades like a monopoly. In just six months, the stock nearly doubled from a July 2025 low near $161 to an all-time high around $330+. As a result, AMAT trades at a 34x forward P/E, almost 2x its 10-year median (about 18x) and moving toward ASML’s 45x-plus multiple. This re-rating has fundamentally shifted the debate. AMAT is no longer priced as a cyclical equipment supplier. It is being valued like a structural winner, implicitly compared to ASML, the industry’s only true monopoly. The problem is that the economics are not the same.

Image by brookhaven from Pixabay

Does AMAT Have Monopoly-Like Economics?

Short answer: No, its business is critical but not irreplaceable.

ASML’s premium has long been justified. It controls lithography, the step that prints the smallest transistor features. EUV (extreme ultraviolet) lithography is required for 3 nm, 2 nm, and future nodes, and ASML is the sole supplier. That exclusivity creates unmatched pricing power, multi-year backlog visibility, and strategic leverage.

AMAT’s role is different. Its portfolio spans deposition, etch, cleaning, inspection, ion implantation, and advanced packaging. This breadth makes it indispensable but also competitive and more exposed to capital-cycle swings. There is no single irreplaceable bottleneck. Yet the market is now assigning AMAT scarcity-like multiples. The company’s revenue breakup is as follows: Foundry/Logic: 72% DRAM: 18% Flash: 10% Top customers include TSMC, Samsung, and Intel.

What Justifies a Higher Multiple?

Rising process complexity, not monopoly control.

The bullish case is not baseless. Semiconductor manufacturing is becoming structurally more complex. As logic chips move from FinFETs (older transistor design) to GAA, or Gate-All-Around (next-gen transistors with better power and performance), the number of process steps per wafer rises sharply. Complexity, not just feature size, is now the growth driver. AMAT estimates that every 100,000 wafer starts (new fab capacity) at a leading-edge GAA node can generate $1 billion in incremental revenue, largely from deposition and etching. This positions the company for stronger growth as the industry evolves with AI workloads coming to the forefront.

For example, AMAT’s Centura Sculpta tool chemically reshapes features after they are printed. It reduces EUV double patterning (multiple costly exposures per layer), saving customers $250M in capex per 100k wafer starts, while lowering water and energy use by 20%. Importantly, this supports ASML’s EUV economics rather than replacing them.

The China Risk

The contrast between ASML and Applied Materials is most visible in China, where U.S. export controls highlight the difference between monopoly economics and critical-but-replaceable suppliers.

Applied Materials faces a materially higher exposure. China has accounted for roughly 35% of AMAT’s revenue in recent quarters, driven largely by mature-node capacity expansion. New U.S. export controls increasingly restrict not only tool shipments but also servicing, upgrades, and optimization of installed equipment. This directly affects Applied Global Services, one of AMAT’s highest-margin and most stable businesses. Management has already flagged a potential $600 million revenue headwind in fiscal 2026 tied to these restrictions.

By contrast, ASML’s China risk is largely capped and already factored into its valuation. ASML has not shipped EUV tools to China for years, China represents a mid-teens percentage of revenue, and remaining DUV sales and services operate under relatively well-defined regulatory limits.

Revenue And Cash Flow Bridge

Applied Materials generated $28.37B in FY2025 revenue

Near-term growth is driven by two structural catalysts: the 2nm GAA transition (more complex, multi-layer transistor designs that require additional deposition and etch steps) and HBM ramps (high-bandwidth memory used in AI accelerators). Related: What’s happening with Micron stock?

Over the next 12 months, these add roughly $1.13 billion of incremental revenue, lifting sales to about $29.5B (+4% YoY).  Looking further out, as AI data center build-outs accelerate and GAA manufacturing scales globally, revenue could expand by another roughly $4.8B by 2028, taking AMAT toward about $39B, which implies a 10% compound annual growth rate from the 2026 base. LTM Free Cash Flow was ~$5.73B. AMAT maintains a record of 48.8% gross margin. We bridge FCF to about $6.5B by 2027 as elevated R&D spending for the new EPIC Center (a major collaborative R&D facility) normalizes and tapers post-2026 ramp-up.

Probably not.  AMAT is growing more critical in AI-era complexity—but it is not immune to cycles, competition, or geopolitics. The stock prices in a flawless execution scenario, with limited margin for error amid China headwinds and modest near-term growth.

Upside drivers: GAA complexity, HBM/AI demand, and advanced packaging leadership.

Ceiling risks: China services hit, capex volatility, no true moat like ASML. Valuation has outpaced fundamentals—execution going forward will decide if it holds.

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