Is This Applied Materials Dip The Same Bet It Used To Be?
Applied Materials (AMAT) has fallen about 21% from its August high, and the question is whether to buy it. Its own history says dips this size have usually been worth buying, and its valuation argues the other way. The history is specific, so start there.
Has Applied Materials Paid Dip Buyers Before?
Since 2010, Applied Materials has fallen 20% or more inside 30 trading days on 11 separate occasions. Of the 10 old enough to have a full year behind them, 7 ended higher twelve months later, and the median return across all 10 was 46%.
Collecting that took a strong stomach. The median buyer sat through another 21% decline in the year that followed and waited a median of 328 days, close to eleven months, for the peak. The record pays slowly, and often only to buyers who can sit through a second fall as deep as this one. The tables below list every one of those 11 falls and what came after.
AMAT had 11 events since 1/1/2010 where the dip threshold of -20% within 30 days was triggered.
- 49% median peak return within 1 year of dip event
- 328 days is the median time to peak return after a dip event
- -21% median max drawdown within 1 year of dip event
| Period | Past Median Return |
|---|---|
| 1M | 4.8% |
| 3M | -3.4% |
| 6M | 4.1% |
| 12M | 46.3% |
| 30 Day Dip | AMAT Subsequent Performance | |||||||
|---|---|---|---|---|---|---|---|---|
| Date | AMAT | SPY | 1Y | Peak Return |
Max Drop |
# Days to Peak |
||
| Median | 46% | 49% | -21% | 328 | ||||
| 7292026 | -25% | -3% | -3% | 14 | ||||
| 3042025 | -20% | -3% | 128% | 161% | -17% | 358 | ||
| 8012024 | -21% | -1% | -8% | 9% | -35% | 74 | ||
| 9262022 | -25% | -14% | 64% | 87% | -10% | 340 | ||
| 6162022 | -24% | -15% | 56% | 60% | -17% | 362 | ||
| 5092022 | -23% | -12% | 10% | 18% | -29% | 315 | ||
| 3012022 | -22% | -7% | -8% | 9% | -42% | 28 | ||
| 3122020 | -24% | -24% | 156% | 176% | -16% | 349 | ||
| 9122018 | -21% | 3% | 37% | 38% | -24% | 315 | ||
| 4242018 | -20% | -5% | -7% | 14% | -40% | 16 | ||
| 8242015 | -21% | -10% | 102% | 102% | -5% | 365 | ||
[2] Analysis for period from 1/1/2010 to 9/15/2026
Is This Still A Business You Would Want To Own?
A record of recovering only counts if the business is sound. Applied Materials clears every basic check: revenue up 7.8% over the trailing twelve months, 27.2% of it converted into operating cash flow, and no strain on the balance sheet.
What it sells matters more than the ratios. Its newest systems are deposition and CMP tools for advanced packaging and an epitaxy system built for DRAM fabs. Management counts DRAM and advanced packaging among the fastest-growing parts of its market, and its largest customers now hand it rolling forecasts eight quarters out.
Serving that demand costs something. The company is hiring manufacturing and customer support teams so it can double its quarterly system output by 2028. Management has guided non-GAAP gross margin for fiscal Q4 2026 to about 50.4%, flat against fiscal Q3 2026 and 32 basis points above a year earlier, even as it guides revenue for that quarter up 51% year over year. The company points to ramp costs, which it expects to fade as revenue grows.
| Quality Metrics | Value | Quality Check |
|---|---|---|
| Revenue Growth (LTM) | 7.8% | Pass |
| Revenue Growth (3-Yr Avg) | 5.2% | Pass |
| Operating Cash Flow Margin (LTM) | 27.2% | Pass |
| Leverage (see below) | – | Pass |
| => Interest Coverage Ratio | 29.5 | |
| => Cash To Interest Expense Ratio | 24.5 |
Are You Paying For The Ramp Or For The Record?
This fall meets the same test the history uses. But even after the drop, Applied Materials is up about 152% over the past year.
The stock trades at about 38 times earnings, against roughly 23 for the S&P 500, on trailing revenue growth in the single digits. You are paying for the ramp management has described, not for the year behind it.
The next real evidence is the report expected around November 12, 2026. The line to watch is whether gross margin starts climbing again once the hiring is behind it. If it climbs, the premium is doing work. If ramp costs keep it flat, it is not.
Would The Next Dip Hurt You Or Pay You?
Buying a dip works best when the position is sized so the next dip cannot hurt you. Concentration tends to arrive by accident rather than by decision. What your largest position would do to your net worth is exactly what the Trefis Wealth team computes, with the same rules-based systematic discipline that runs our High Quality Portfolio. Request a free vulnerability audit of your biggest positions.