Applied Materials Sees AI-Driven Demand Boosting Semiconductor Equipment Outlook

Applied Materials (AMAT) highlighted strong demand trends at the Citi 2026 Global Technology, Media & Telecommunications Conference, emphasizing artificial intelligence as a sustained catalyst for its semiconductor equipment business. Management cited customer conversations, fab tracker data, and capacity planning to extend its visibility into 2030, with expectations for output to double by 2028. The company’s gross margins expanded by 300 basis points over the past three years, reaching 49.4% in the trailing twelve months, though it anticipates stability in the near term. Revenue growth in 2025 was driven by advanced packaging, which rose more than 70% from a $1.4 billion base, while services revenue grew over 20%, revised from earlier low double-digit projections to mid-teens. Process diagnostics and control segments are expected to grow over 50% annually through 2026, with foundry logic, DRAM, and advanced packaging accounting for over 80% of growth in the current year and 2026. Industry wafer starts are projected to rise from about 1.6 million per month to 2.4 million by 2030, supported by 15 to 17 new greenfield fabs, each requiring approximately $10 billion for 100,000 wafer starts. Applied Materials’ stock closed at $472.79 on September 8, 2026, up 3.98% from its previous close, though after-hours trading saw a slight decline of 0.17%. The company’s P/E ratio stands at 38.96, reflecting a higher valuation relative to historical norms. Analysts have revised earnings upward, with revenue growth forecast at 21% for fiscal 2026. Brice Hill, Senior Vice President and Chief Financial Officer, attributed confidence in demand to AI-driven systems, noting that customers are optimizing processes to meet compute ambitions despite memory constraints. He also highlighted the company’s ability to cover all 16 processing steps in advanced architectures, ensuring material efficiency and cost adjustments tied to R&D improvements. U.S. cloud capital expenditures for 2026 are projected above $700 billion, with global cloud spending nearing $1 trillion, underscoring the broader tech industry’s expansion.