Applied Materials poised to reach $380 per share with booming AI chip demand

In the United States, Applied Materials (NASDAQ:AMAT) has emerged as a significant player in the semiconductor manufacturing industry. The company's growth is largely attributed to the increasing capital expenditures related to artificial intelligence technologies. Over the past five years, Applied has reported a solid annual revenue growth rate of 13%, driven by its advanced equipment and software used in semiconductor chip production. However, while FY'25 is expected to reflect a sales growth slowdown to approximately 6% with revenues around $29 billion, the outlook for the following years is more optimistic. Market trends suggest that if demand for advanced tools to manufacture AI chips continues to rise, Applied's revenue could climb to about $53 billion by FY'28, representing an impressive increase of roughly 81%. Though there are concerns over the company's significant exposure to China due to U.S. export restrictions, emerging signs of easing tensions could benefit Applied significantly. As the company positions itself strategically to serve industry leaders like TSMC, Samsung, and Intel, the increasing demand for high-end semiconductor products has led to improved profit margins. For instance, the adjusted net margins have climbed from 19.6% in FY'19 to approximately 26.5% in FY'24, indicating a positive trend in operational efficiency and premium product offerings. The disciplined capital expenditures relative to peers in the semiconductor sector have also played a key role in enhancing margins and profitability. In light of these developments, projections indicate that Applied Materials could achieve a substantial growth in earnings, anticipated to multiply by around 2.2x over the next three years. Notably, this growth could influence the company's price-to-earnings (P/E) multiple, which is currently at around 20x. Rather than witnessing a contraction in this multiple, a more stable P/E ratio around 18x seems plausible. As a result, this scenario raises the possibility of the stock price doubling from its current value of $190 to potentially $380 over the next few years. Such projections rest on the company's effective execution of its growth strategy amid favorable market conditions. If Applied Materials manages to maintain this trajectory of revenue and margin growth, it could boost investor confidence and lead to a notable rise in stock prices. However, the volatility of their stock performance over recent years must be taken into account, as values fluctuated significantly with returns of 84% in 2021, -38% in 2022, 68% in 2023, followed by a more modest 9% in 2024 and a 17% year-to-date increase in 2025. Investors should remain vigilant in monitoring the overall market environment and the company's quarterly performance to gauge future investment opportunities.