Applied Materials jumps 12% as AI chip demand drives strong revenue forecast

Summary

Applied Materials shares surged nearly 12% in premarket trading after the semiconductor equipment maker forecast second-quarter revenue and profit well above Wall Street expectations. The outlook reinforces investor confidence that AI-driven capital spending in memory, logic and advanced packaging remains strong despite broader market volatility.

NEW YORK, Feb 14 — Shares of Applied Materials climbed sharply in early trading after the company issued a second-quarter forecast that exceeded analyst estimates, underscoring sustained investment in artificial intelligence infrastructure.

The upbeat outlook comes as hyperscalers expand AI data centre capacity and chipmakers ramp up production of high-bandwidth memory (HBM) and advanced logic chips to support generative AI workloads.

Forecast beats estimates

Applied Materials projected second-quarter revenue of about $7.65 billion, plus or minus $500 million, above analysts’ average estimate of $7.01 billion, according to LSEG data.

Adjusted earnings are expected to reach $2.64 per share, comfortably ahead of the consensus forecast of $2.28.

Chief executive Gary Dickerson said the performance was “fueled by the acceleration of industry investments in AI computing,” with demand rising across leading-edge logic, HBM and advanced packaging technologies.

AI boom tightens memory markets

The surge in orders reflects tightening supply chains in memory and advanced chips as AI training and inference workloads consume large volumes of DRAM and HBM.

Industry body SEMI forecast in December that global sales of wafer-fabrication equipment will rise about 9% to $126 billion in 2026 and a further 7.3% to $135 billion in 2027, pointing to sustained capital expenditure by chipmakers.

Analysts say Applied Materials is well positioned due to its exposure to DRAM, HBM, advanced logic and packaging equipment — all critical components in next-generation AI processors.

Sector-wide lift

The strong forecast lifted peers across the semiconductor equipment sector.

Shares of ASML, the world’s largest supplier of chipmaking machinery, rose about 1.8%, while Lam Research gained roughly 2%. KLA Corp also traded higher.

Applied Materials shares are now up around 28% year-to-date, outperforming the Philadelphia Semiconductor Index (SOX), which has gained about 14% over the same period.

Multi-year growth narrative

The results reinforce a broader market thesis: AI infrastructure spending is entering a multi-year buildout phase, with semiconductor equipment suppliers emerging as key beneficiaries.

As chipmakers expand wafer fabrication plants and invest in advanced packaging capacity to meet AI demand, capital equipment vendors such as Applied Materials stand to capture sustained order growth — particularly if memory markets remain tight.

Why this matters

The semiconductor equipment industry often acts as an early-cycle indicator for chip demand. Strong forward guidance from Applied Materials suggests that AI-related capital expenditure is not only intact but accelerating.

For investors, the results signal:

• Continued resilience in AI-linked spending
• Strength in memory and advanced packaging markets
• Potential for sustained earnings upgrades across equipment makers

If AI-driven semiconductor demand remains elevated, equipment suppliers could see multi-year visibility on orders — a key factor supporting current valuations.

FAQs

Q1: Why did Applied Materials shares jump?

The company forecast second-quarter revenue and profit above analyst estimates, signaling strong AI-driven demand for chipmaking equipment.

Q2: What is driving demand?

AI data centre expansion and rising use of high-bandwidth memory are prompting chipmakers to increase spending on wafer-fab and advanced packaging tools.

Q3: How does this affect the broader sector?

Peers such as ASML, Lam Research and KLA also saw share gains, reflecting optimism about sustained semiconductor capital expenditure.

Q4: What are the revenue projections?

Applied Materials expects about $7.65 billion in second-quarter revenue and adjusted earnings of $2.64 per share.

Q5: Why is memory important for AI?

AI workloads require large volumes of DRAM and high-bandwidth memory, tightening supply and driving fresh manufacturing investment.

Q6: How has the stock performed this year?

Shares are up roughly 28% year-to-date, outperforming the Philadelphia Semiconductor Index.