Applied Materials (AMAT) shares surged 8% as chip demand forecast extended to 2030

Key points

Applied Materials shares rose about 8% on Thursday after CEO Gary Dixon told Nikkei Asia that demand forecasts have been extended into 2030.

TD Cowen raised its target price for Applied Materials by 33% to $700 from $525; Mizuho Bank raised its target price to $650.

Revenue in the second quarter of fiscal year 2026 hit a record high of US$7.91 billion, a year-on-year increase of 20%, and earnings per share of US$2.86 exceeded expectations.

Applied Materials is up 141% year-to-date, but its share price is still about 18% below its 52-week high of $739.67.

Fiscal third-quarter results are expected to be released on August 13, and analysts generally expected earnings per share of $3.39 and revenue of $8.94 billion.

Applied Materials shares surged on extended chip demand prospects.

Applied Materials Company\'s (AMAT) shares rose strongly by about 8% in early trading Thursday, to $620, after CEO Gary Dixon said demand clarity has reached an unprecedented level.

In an interview with Nikkei Asia, Dixon revealed that the equipment demand forecasts currently provided by semiconductor manufacturers have extended to more than two years-with some forecasts reaching as far as 2030. This extended planning period is rare in the chip manufacturing industry and has attracted widespread attention from the investment community.

Dickson said: \"Chip makers are sharing their equipment demand outlook for the next two years or more to ensure capacity expansion proceeds smoothly.\"

The timing of these remarks was just right. Earlier in May, semiconductor equipment makers suffered a sharp decline amid concerns about an oversupply of NAND memory and delays in capital spending plans. Companies including Kolei, Fanlin Semiconductor and Teraida experienced double-digit declines in one trading day.

Dixon\'s speech reversed this pessimistic expectation. He described the current wave of investment as AI-driven and sustainable, rather than cyclical.

This view was further verified by TD Cowen analyst Krish Sankar. He raised Applied Materials\'s share price target by 33% on Thursday, from $525 to $700. Mizuho Bank also raised its target price to US$650. Sankar maintains a \"buy\" rating and believes there is still about 15% room for current stock prices to rise.

Sankar predicts that the wafer manufacturing equipment market will reach US$250 billion by 2028 and may expand to US$500 billion by 2030. He believes that Applied Materials and Kolei will be the main beneficiaries because the two companies occupy important positions in the fields of lithography front-ends, logic chip equipment and DRAM manufacturing tools.

Susquehanna independently raised its wafer manufacturing equipment market forecast to US$250 billion by 2028, also attributing the growth to artificial intelligence investment and dynamic improvements in the memory market. In the same research report, the agency also raised its target share prices for Advanced Energy Industries, Fanlin Semiconductor and Kolei.

Strong financial performance supports optimistic outlook

Applied Materials announced its financial results for the second quarter of fiscal year 2026 on May 14. Revenue reached a record $7.91 billion, a year-on-year increase of 20%, exceeding analysts \'expectations of $7.68 billion. Earnings per share were $2.86, higher than market expectations of $2.68.

The semiconductor equipment manufacturer is also expanding production capacity. The company recently more than doubled the area of its advanced cleanroom facility in Singapore to meet the growing demand of chip manufacturers.

Applied Materials shares have risen 141% so far this year. Despite the significant increase, the stock is still about 18% below its 52-week high of $739.67. If demand expectations materialize, this means potential room for recovery.

The upcoming August earnings report attracts much attention

The next important event is the fiscal third-quarter earnings report scheduled to be released on August 13. Analysts have raised earnings forecasts 25 times in the past 90 days, and there have been no record downgrades.

The current consensus market forecast is for earnings per share of $3.39 and revenue of $8.94 billion.

Research firm SemiAnalysis predicts that the total cumulative investment in global artificial intelligence infrastructure from 2024 to 2029 may reach US$11.1 trillion. If this forecast is realized, it will continue to support equipment demand.

Among Wall Street analysts, Applied Materials received a \"Strong Buy\" consensus rating, with a total of 23 Buy ratings and 2 Hold ratings in the past three months.