2024-04-19 11:15:09 ET
Summary
- AMAT experienced some challenges in the latest earnings due to delayed projects and ICAPS market.
- Semiconductor industry has a strong momentum to recover in 2024 and resilient demand fundamentals.
- The article will go through key inflections of GAA, HBM, advanced packaging, backside power delivery, innovative pattern-shaping, eBeam tools, ICAPS, and their application for AMAT.
- I am rating Applied Material with a Strong Buy rating, based on 65%upside potential.
In my previous write-up on Applied Materials ( AMAT ), I suggested that the company could emerge as a main beneficiary of the gradual transition to advanced process technology amid the rapid development of AI. Since then, the stock price has surged by 44.6%, and with this article, I am lifting the AMAT stock to a Strong Buy rating based on the calculated 65% upside potential. I believe that Applied Materials could further excel with its broadest industry-leading portfolio, enabling the company to dominate the key technology inflection points amid the expected normalization of the semi-industry demand profile. The article will walk you through the industry outlook and financials, as well as the main technology inflection, namely GAA, HBM, advanced packaging, backside power delivery, innovative pattern-shaping, eBeam tools, ICAPS, and their application for the company’s growth and profitability.
Technology inflections leader
The global semiconductor market is about to showcase more encouraging dynamics in 2024 on the background of the forecasted 13.1% rebound in chip sales. The industry is already growing, and if we take the WSTS expectations for granted, it implies that chip sales could grow by 1.8% sequentially through the year. The most striking growth should come from the memory market, up 44.8%, and the company is well positioned to progress in this area. Overall, the main drivers for the semi-industry remain the continued spread of AI and high-performance computing technologies, machine learning, the deployment of 5G networks, IoT, VR/AR, and the expanding use of semiconductors in the automotive industry. The executives were also positive in the latest earnings call about the prospects:
In our discussions with customers, we’re hearing that overall market dynamics are improving. There is a reacceleration of capital investment by cloud companies, fab utilization is increasing across all device types and memory inventory levels are normalizing.
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For further details see:
Applied Materials: Domination In Technology Inflections (Rating Upgrade)