4. Applied Materials Inc. (NASDAQ:AMAT)
Number of Hedge Fund Investors: 68
Earlier this month Citi published a list of large-cap stock recommendations for 2024. Applied Materials Inc. (NASDAQ:AMAT) was part of this list.
As of the end of the third quarter of 2023, 68 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Applied Materials Inc. (NASDAQ:AMAT). The biggest hedge fund stakeholder of Applied Materials Inc. (NASDAQ:AMAT) during this period was Generation Investment Management with a $1.2 billion stake.
Generation Investment Management made the following comment about Applied Materials, Inc. (NASDAQ:AMAT) in its Q2 2023 investor letter:
Applied Materials, Inc. (NASDAQ:AMAT): Semiconductor revenue has grown 6% per year since 2010, driven by increasing demand for smartphones, datacentres and electronic content in vehicles and industrial settings.4 Through work spanning six roadmaps covering many sub-themes within semiconductors (including industry consolidation, capital equipment and generative AI), we are confident that these trends will continue or even accelerate in the coming decades. The rise of generative AI in particular will require high-performing semiconductors, such as Nvidia’s GPUs, in datacentres.
Traditionally the industry relied on semiconductor manufacturers to deliver steady advances in semiconductor performance while reducing costs. This phenomenon is known as Moore’s Law, which was identified by Intel founder Gordon Moore. Traditionally, Moore’s Law relied on shrinking the light source used to expose photosensitive material on a silicon wafer to make smaller semiconductors, which in turn led to falling costs.
In recent years, however, Moore’s Law has slowed. Manufacturing has run up against the limits of physics. Making semiconductors smaller more cheaply has therefore become difficult. The latest generation of lithography machines that create this light source are marvels of modern science, but they are also expensive to produce, not to mention power-hungry. Delivering performance improvements in the most advanced semiconductors is now becoming costlier. This presents a risk, both to generative AI and a net zero world.
All is not lost, however. The semiconductor industry attracts some of the best minds in the world, many of whom are looking at alternative ways to continue to deliver more power-efficient and cheaper semiconductors. A key area of focus is around developing new materials used in manufacturing semiconductors, and new ways of applying (‘deposition’) and selectively removing (‘etch’) these materials to create the desired semiconductor. Applied Materials is one of the companies in the vanguard of these developments…” (Click here to read the full text)
