Applied Materials, Inc.

Applied Materials does not make chips — it makes the machines that chipmakers use to manufacture chips. Every new semiconductor fab, whether built by TSMC in Arizona, Samsung in Texas, or Intel in Ohio, requires billions of dollars of Applied Materials equipment before a single chip can be produced. That makes AMAT a leveraged play on global semiconductor capital expenditure, which is at a historically elevated level as AI demand forces chipmakers to massively expand capacity.

AMAT's second quarter of fiscal 2026 delivered its highest gross margin in over two decades, signaling that the business is not just benefiting from cyclical capex but has structurally improved its pricing power and product mix. The shift toward gate-all-around (GAA) transistors and advanced packaging — both requiring new equipment generations — is a multiyear tailwind that supports AMAT's revenue growth regardless of near-term cyclical swings.

Semiconductor equipment stocks follow a well-documented capex cycle: memory companies cut equipment spending in downturns and resume aggressively when utilization recovers. AMAT has historically offered its best entry points during periods when memory capex is at a trough and logic (AI/foundry) spending is beginning to accelerate — the two cycles tend to be offset by 12-18 months, giving AMAT a more sustained earnings trajectory than pure-play memory equipment companies.

For momentum traders, AMAT tends to break out when the broader semiconductor sector (SOXX) is in a confirmed uptrend and AMAT is establishing higher lows after a correction. The stock's options market is liquid enough for defined-risk directional trades around earnings, where the implied move typically understates the actual move during strong up-cycles.