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Applied Materials, Inc. AMAT shares have plunged 17.1% in the past three months, underperforming the Zacks Computer and Technology sector’s decline of 13%.
Applied Materials Performance Chart
Image Source: Zacks Investment Research
Applied Materials’ recent decline stems from a mix of broader market weakness. A widespread sell-off in tech stocks, triggered by fears of rising trade tensions and slowing economic growth concerns, has put pressure on the entire sector, including Super Micro Computer.
This decline in the share price of this semiconductor leader raises the question: Should investors take advantage of this decline and buy the dip?
Applied Materials Faces Stiff Competition
As Applied Materials provides engineering solutions for semiconductors, flat panel display, and solar industries, it faces competition from players like Lam Research LRCX in the semiconductor space, ASML Holding ASML in the photolithography and advanced manufacturing equipment segment. KLA Corporation KLAC is a dominant competitor in the wafer inspection space.
For instance, Lam Research develops Atomic Layer Deposition tools like AT200M, AT410 and AT650P, which are similar to the devices made by AMAT. Both ASML and AMAT specialize in advanced semiconductor nodes, although they develop solutions for various stages of semiconductor production. ASML Holdings develops lithography solutions, including EXE and NXE systems.
Applied Materials and KLA Corporation offer similar solutions like Wafer Inspection, Yield Enhancement and Process Control inspection systems. KLA Corporation develops inspection systems, including 3935 and 3920 EP broadband plasma defect inspection systems. Although AMAT is dealing with a broader market sell-off and growing competition, not everything is gloom and doom for the company.
AMAT’s Technological Leadership Remains a Major Advantage
The demand for AI-driven semiconductors is at the heart of the industry’s next growth cycle, and Applied Materials is well-positioned to capitalize on this transformation. The company has made significant strides in cutting-edge chip manufacturing, particularly in gate-all-around (GAA) transistors, high-bandwidth memory and advanced packaging. These innovations are critical to enabling faster, more energy-efficient AI processing.
Applied Materials’ revenues from advanced semiconductor nodes surpassed $2.5 billion in fiscal 2024, and management expects this figure to double in fiscal 2025. The transition from FinFET to GAA transistors is expanding AMAT’s total addressable market by 15%, while Applied Materials’ revenues in this segment are projected to grow 30% per wafer fab capacity expansion. The company is also on track to secure more than 50% of the market share in GAA and backside power delivery, solidifying its leadership in the AI computing era.