AI Stock Hits: Applied Materials Under Review

The ongoing earnings season is once again sparking investors' interest in artificial intelligence (AI) investments in S&P 500 companies. While analysts anticipate a slowdown in earnings growth, it is evident that technology sectors, particularly communication services, are showing strong growth figures. Specifically, technology earnings are expected to rise by 15.4% year-over-year, and communication revenues by 12.3%. AI-related companies have shaped earning reports since last year and have significantly fueled the market. The S&P 500 has gained an impressive 21% this year, largely driven by the strong technology and communication sectors. Key to the rise in stock prices of major companies like Meta is the successful monetization of their AI initiatives. Meta experienced a surge in its stock price after announcing strong revenue forecasts, as digital ad revenues effectively support its AI engagement. In contrast, Google's intensive spending on AI technologies raises questions about their integration into existing business models. Trading at 22.3 times future 12-month earnings estimates and above its long-term average, many investors hope that current quarterly earnings justify the high stock valuations. The semiconductor segment, in particular, is at the forefront of AI investments, offering significant growth opportunities. In this environment, Applied Materials has positioned itself as a major player in the semiconductor sector. The company has demonstrated impressive financial performance over the last ten years, increasing its revenue by nearly 350%. The future prospects are positive, with revenue expected to grow to over 37 billion USD by 2028. This growth momentum is driven by the rapid proliferation of AI technology, which offers substantial opportunities for the company. According to JPMorgan analyst Harlan Sur, Applied Materials is well-positioned to benefit from several upcoming technology developments and to outperform in the wafer manufacturing technology sector in the coming years. Although Applied Materials ranks 18th on the list of trendy AI stocks, we see more promising return prospects in a shorter timeframe with some other AI stocks. For those interested in a more affordable yet promising investment, we recommend our report on the most affordable AI stock.