Applied Materials, Inc.

(NASDAQ Global Select)
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Somewhat Bullish +50

ASML vs. Applied Materials: Which AI Chip-Equipment Stock Is the Better Buy?

AI infrastructure Company update AI-generated analysis

πŸ“Š ASML reported Q2 sales of €9.3 billion with a 54% gross margin and expects 2026 sales between €43-45 billion.

πŸ’° Applied Materials achieved record fiscal third-quarter revenue of $9.12 billion, representing a 25% year-over-year increase.

πŸ“ˆ AMAT's GAAP gross margin rose to 50.3% while operating margin reached 33.7% in the latest quarter.

πŸ“‰ Applied Materials saw EPS increase by 43% and generated $2.33 billion in non-GAAP free cash flow.

🌏 28% of Applied Materials' quarterly revenue originated from China, creating specific export-control exposure risks.

🏦 Fisher Asset Management increased its ASML stake by roughly 3%, holding 4.74 million shares as of Q2.

πŸ“‰ Coatue Management reduced its Applied Materials position by approximately 20% during the quarter.

πŸ”’ ASML is identified as a structural bottleneck for leading-edge chip production due to its EUV system monopoly.

πŸ’΅ Applied Materials trades at a lower forward multiple (27x) compared to ASML's 31x forward earnings.

πŸ“‰ AMAT short interest stood at 15.62 million shares, representing 1.97% of the float as of August 31.

Bullish Signals
  • Applied Materials reported record fiscal third-quarter revenue of $9.12 billion, up 25%, demonstrating strong demand for its equipment.
  • The company achieved a GAAP gross margin of 50.3% and an operating margin of 33.7%, indicating robust profitability.
  • EPS increased by 43% in the quarter, reflecting significant earnings growth driven by operational performance.
  • Applied Materials generated $2.33 billion in non-GAAP free cash flow, highlighting strong liquidity generation.
  • The company's broad portfolio across deposition, materials engineering, and advanced packaging diversifies its exposure to different chip architectures.
Risk Factors
  • Applied Materials lacks the single irreplaceable product category that ASML possesses, facing stronger competition across its broader portfolio.
Full Analysis
The article compares ASML Holding (ASML) and Applied Materials (AMAT) as competing semiconductor equipment stocks, noting that while they serve different process steps, both compete for the same capital expenditure dollars from chipmakers. ASML is highlighted for its near-monopoly on EUV lithography required for leading-edge logic chips, trading at a forward P/E of 31x with Q2 sales of €9.3 billion and a gross margin of 54%. Management projects 2026 sales between €43-45 billion. Applied Materials reported record fiscal third-quarter revenue of $9.12 billion, up 25%, driven by its broad portfolio covering deposition, materials engineering, and advanced packaging. The company achieved a GAAP gross margin of 50.3% and an operating margin of 33.7%, with EPS increasing 43%. However, AMAT faces stronger competition across its portfolio and has significant exposure to China, accounting for 28% of quarterly revenue. Institutional ownership data shows Fisher Asset Management increased its stake in ASML by roughly 3%, while Coatue Management cut its position in Applied Materials by approximately 20%. The article concludes that while AMAT is cheaper and more diversified, ASML offers better risk-adjusted returns due to its technological bottleneck status and stronger pricing power, despite the premium valuation.