Applied Materials $AMAT ( ▲ 8.08% ) soared after delivering a blockbuster earnings report that convinced Wall Street the company is a major beneficiary of the AI chip boom. The semiconductor equipment giant beat expectations on both revenue and profit and issued Q2 guidance that also topped estimates, sending shares sharply higher in early trading.
Analysts quickly moved to raise price targets, arguing that surging demand for advanced chip manufacturing tools could drive a new phase of growth. Several firms now see meaningful upside as chipmakers race to expand capacity for AI processors.
From China fears to AI tailwinds
One of the biggest shifts in sentiment is the fading concern over China-related headwinds. Needham described the quarter as “narrative-changing,” saying Applied Materials is transitioning back into a powerful AI-driven growth cycle after months of skepticism.
JPMorgan echoed that optimism, pointing to a sharp acceleration in customer orders and activity. Management’s noticeably more upbeat tone on the earnings call reinforced the view that demand is not just stable but strengthening.
HBM demand fuels the next leg of growth
A major catalyst is Applied Materials’ leadership in advanced packaging for high-bandwidth memory, or HBM, a critical component for AI chips. As chipmakers move from HBM3e to HBM4 and beyond, new manufacturing equipment is required, creating a wave of spending on tools that companies like Applied Materials supply.
That dynamic positions the company squarely at the center of the AI infrastructure buildout. As previously shipped equipment gets fully utilized, customers are already preparing to order more to support the next generation of technology.
Wall Street rushes to reprice the story
The bullish shift triggered a cascade of price target increases across major banks. New targets from firms like KeyBanc, Barclays, Wells Fargo, Citi, Morgan Stanley, and Mizuho now stretch as high as the mid-$400 range, signaling growing confidence that Applied Materials could close its valuation gap with peers.
In short, the quarter didn’t just beat expectations. It reshaped the narrative around the company’s future—turning it from a cyclical chip supplier into a core enabler of the AI era.