Applied Materials (AMAT) — Positioned to Ride the Next Big Wave in Chip Manufacturing
Applied Materials trades around $231, and the setup going into 2026 and 2027 looks stronger than most investors realize. What stands out to us is how quickly demand is building behind the scenes in wafer fab equipment (WFE), the machinery that actually turns raw semiconductor wafers into finished chips.
We’re seeing early signs that the next two years could be much bigger for this category than the market is pricing in. Memory spending is ramping aggressively, and if WFE really does push past the 20% year-over-year growth mark in 2026 and approach $145 billion in 2027, companies tied to DRAM-heavy capital cycles should be in a prime position. Applied Materials is one of the names that consistently rises to the top of that list.
What makes this especially interesting is China. The industry’s collective expectations for Chinese WFE demand in 2026 still seem low, and yet China is already signaling that next year could be far stronger than consensus models suggest. Applied Materials has renewed its focus there after some recent market share pressures, and that renewed push could convert into real gains as spending accelerates.
UBS upgraded the stock to buy and raised its target to $285, noting AMAT could be the largest direct beneficiary of the DRAM spending surge, but that sentiment only reinforces what we’ve already been watching unfold. If WFE demand firms the way early indicators suggest, Applied Materials should be one of the most straightforward ways to capture that strength. It’s also worth noting that the broader analyst community is leaning in the same direction, with 21 of the 34 analysts tracked by LSEG rating the stock a buy or strong buy.
With shares already up 42% this year and momentum accelerating into 2026, we see a compelling multi-year setup driven by memory, China, and a tightening equipment cycle that looks stronger than what the Street is modeling today.
