AMAT是AI基础设施敞口的长期持有标的；当前估值隐含未来5年约24%的每股收益年复合增长率。

Let's do a review of Applied Materials, the ticker AMAT. Applied Materials being the second largest by revenue behind ASML. After putting up some really solid returns early on in the AI and semiconductor bull market in 2023 and 2024, Applied went cold for a good chunk of the end of 2024 through 2025.

We'll put some links to some videos we did in March of 2025 and then almost exactly 1 year ago, last August, talking about what happened, some of the customer concentration, but why that was going to change eventually, sooner or later.

And uh boy did it ever certainly change starting in September last year. Pretty crazy spike in the stock price culminating in what has been a a pretty darn good total return over the last 5 years, which of course includes the last bear market, over 300% total return.

The stock has sold off, as you can see from this chart from our friends over at fiscal.ai, the sponsors of today's video. What caused that spike through June, July of this year? Why has there been a sell-off? And why do we still think Applied Materials has a place in our portfolio here at Chip Stock Investor?

I put together a number of slides I'll share with you from fiscal.ai, also used their earnings call tool AI tools to sift through the earnings call transcript and other key performance indicators KPIs for Applied Materials and the other Fab 5 companies.

This is Applied Materials revenue gross profit margin and operating profit margin on a quarterly basis. Why did the stock start going on a run starting in Q4 of last year, around September of last year after another sell-off?

Well, there was a brief down cycle for Applied Materials, which seems kind of crazy, doesn't make a lot of sense given customers like Taiwan Semi Manufacturing, the memory oligopoly, and other companies were getting ready to massively expand their fab capacity, but the cycles for Applied Materials and other fab equipment providers are upstream from the foundries and the fabs. So, their revenue is a bit more lumpy.

The sales cycle the sales cycles can be shorter, but the market was obviously anticipating that this year and 2027 were going to be pretty hot. And you can see in this chart that most definitely has been that. Q3 fiscal year 2026 for Applied corresponds with Q2 of the calendar year. Revenue was just over 9.1 billion and gross profit margin was at 50% and operating profit margin well over 30% on an annualized basis. We are back at all-time highs.

For historical reference, Applied's peak annual operating profit margin was all the way back in 2000 during the dot-com era at 30.8%. It appears that over the course of the next year and a half or so, Applied is going to exceed that previous peak.

Pretty wild. This is cited as a reason to be bearish on Applied. I'm of the belief it's not that simple.

The semiconductor industry has come a long ways in the last 25 years. End markets have expanded significantly. The industry was just a fraction of what it is today and we hadn't even gone through the mobile revolution spawned by Apple, let alone the current AI revolution today. Use of semiconductors has deepened, has gotten more complex, and Applied and its peers and competitors in fab equipment have consolidated quite a bit over the course of that two and a half decades as well. So, in my mind, re-achieving gross and operating margin peak levels is in of itself not indicative of this thing coming to an end.

Couple of slides here from Applied. They're in the green column there in the middle. Their last quarter revenue of 9.1 billion, up 25% year-over-year. Adjusted earnings per share up 41%

and what's supporting the overall huge run-up in the last year, even though we have sold off from that little blip the last 2 months where the stock price reached unsustainable levels. Here's the outlook for the next quarter, for Q4 of their fiscal year 2026, which corresponds with Q3 of the calendar year. Another big sequential jump in revenue to, for the first time, over 10 billion in quarterly sales. Maybe even closer to 11 billion at the high end of that guidance. That implies year-over-year revenue growth of over 50% at the midpoint.

And management indicated that they expect sequential growth once again in Q1 of fiscal year 2027, which would be Q4, final quarter of 2026.

Headed into the new year, Applied Materials is going to be a 40 billion-dollar plus revenue business on an annualized basis, and they expect the strong pace of growth to continue next year as their customers are trying to expand their fab capacity and have launched a number of new fab projects just in this last quarter alone.

That includes a new run of growth expected from China, which to this day is still Applied Materials' largest revenue segment by geography, China being the world's largest semiconductor market and dumping a lot of money into building itself its own domestic semiconductor market for its own consumption.

At the midpoint of guidance for the next quarter, as of this recording, we don't have the the 10-Q, the SEC filing for the quarter yet, but on the earnings call, management did say China revenue was at 26% of systems and AGS, that's the services segment for Applied. 26% of those two revenue line items, which would be about 2.29 billion, and they said China is back in growth mode.

So, what has been a headwind the last few years, Applied's customers in China working through very large build-out during the chip shortage of 2021 and 2022, that has wound down. This segment is expected to return to growth.

It's probably going to be a pretty hot geopolitical topic given the tensions between the US and China, but at any rate, as far as we can tell right now, this will be a growth outlet for Applied once more for the rest of this year and next year.

It's not just China, of course, driving this growth. AI data centers are the primary growth driver, but another segment of the industry that has been a weight, a headwind against Applied has been its iCaps segment, which includes power and optical semiconductor manufacturers. So, that segment has begun to grow again, joining advanced foundry, advanced fab for logic, advanced memory.

And that iCaps segment could be an area of particular note in the coming years as a lot of AI begins to move out of the data center and into the real world in edge AI or physical AI applications. That's where a lot of those iCaps companies that buy Applied equipment participate.

As a result, management said it is going to be doubling its own system manufacturing capacity from current levels by 2028. That doesn't mean revenue is going to double. It just means they need to get that capacity in place because as a lot of their customers have extended lead times and have been signing extended contracts with its end market customers, everything from data centers to automotive and industrial customers, they need a commitment from Applied that they'll be able to get the equipment they need through the end of this decade.

This is more of just a general direction for the pace of revenue growth and profit margins for Applied. I believe the messaging here from management was, yes, the revenue is going to be going up. Expect slower increases in operating profit margin and expansion of that compared to what they've enjoyed the last few years as they repriced a lot of their equipment. But, nevertheless, over the course of the next 5 years, we should also, in addition to revenue growth, also get some positive operating leverage as well.

After the sell-off from all-time highs, if you run a reverse DCF, Applied Materials stock price now basically pricing in about 24% CAGR in earnings per share over the next 5 years. Is it a high bar to clear? Yes, it is. This is not a cheap stock after the sell-off.

The market is well aware of what's going on at Applied and the other fab five companies. It's well known that they are going to be selling a lot more equipment through the end of the 2020s and into 2030.

We nevertheless think this is still a really important foundational part of a portfolio investing in the AI trade. Uh the electronic supply chain build-out, a lot of countries all over the world investing very heavily to support domesticating supply chains of semiconductors and other electronic equipment and assembly of electronic parts and final devices. Applied is going to participate in all of that. It's a full suite, everything from front-end wafer development all the way to packaging and metrology.

So, this is certainly not a cheap stock. On the contrary, it is trading at a premium, but one that we think still harbors a very important place in a portfolio invested in the the AI infrastructure build-out and eventually the proliferation of that into the rest of the economy.

So, we remain long here Applied Materials at CSI and some of the other key wafer fab and advanced packaging companies.