Triggers That Could Ignite the Next Rally In Applied Materials Stock
Applied Materials has shown remarkable rallies, with more than 30% gains in under two months on 14 occasions, notably in 2020 and 2025. Four times, its stock surged over 50% within a similar timeframe, highlighting powerful upward momentum. If history repeats, key catalysts could propel AMAT shares to significant new highs, offering substantial rewards for investors.
Specifically, we see these catalysts:
- AI-Driven DRAM & Advanced Packaging Acceleration
- AGS Recurring Revenue Unlocking & Margin Inflection
- EPIC R&D Center Launch
Catalyst 1: AI-Driven DRAM & Advanced Packaging Acceleration
- Details: Accelerating revenue growth in H2 2026, Outpacing consensus Wafer Fab Equipment (WFE) forecasts
- Segment Affected: Semiconductor Systems
- Potential Timeline: H2 2026
- Evidence: AI reaching a ‘tipping point’ per management, Leading-edge DRAM revenues surging over 50% YoY
Catalyst 2: AGS Recurring Revenue Unlocking & Margin Inflection
- Details: Expanding Gross Margins beyond 25-year highs, Driving valuation re-rating via pure-play recurring services revenue
- Segment Affected: Applied Global Services (AGS)
- Potential Timeline: Q1 2026 Earnings
- Evidence: Q1 2026 reporting change isolates 100% recurring AGS revenue, Achieved record 48.8% gross margin from richer advanced systems mix
Catalyst 3: EPIC R&D Center Launch
- Details: Accelerating new product introductions for next-gen nodes, Solidifying long-term market share in critical technologies
- Segment Affected: Semiconductor Systems
- Potential Timeline: Mid-2026
- Evidence: New facility for high-velocity co-innovation with customers, On track to begin operations in 2026
But The Stock Is Not Without Its Risks
Here are specific risks we see:
- Crippling Cash Flow Contraction Masked by EPS Accretion
- Unresolved U.S. Criminal Probe into China Shipments
- Escalating Intellectual Property Battle in China
Looking at historical drawdown during market crises is another lens to look at risk.
AMAT fell 76% in the Dot-Com crash, 64% in the Global Financial Crisis, and 55% during the inflation shock. The 2018 correction and Covid dip were still over 40% drops each.
Read AMAT Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
Reference: Current Fundamentals
- Revenue Growth: 4.4% LTM and 3.2% last 3-year average.
- Cash Generation: Nearly 20.1% free cash flow margin and 29.9% operating margin LTM.
- Valuation: Applied Materials stock trades at a P/E multiple of 36.6
| AMAT | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | Semiconductor Materials & Equipment | – |
| PE Ratio | 36.6 | 24.3 |
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| LTM* Revenue Growth | 4.4% | 6.4% |
| 3Y Average Annual Revenue Growth | 3.2% | 5.6% |
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| LTM* Operating Margin | 29.9% | 18.8% |
| 3Y Average Operating Margin | 29.2% | 18.3% |
| LTM* Free Cash Flow Margin | 20.1% | 13.6% |
*LTM: Last Twelve Months | If you want more details, read Buy or Sell AMAT Stock.
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