We recently published a list of 10 Best Manufacturing Stocks To Buy Now. In this article, we are going to take a look at where Applied Materials Inc. (NASDAQ:AMAT) stands against other best manufacturing stocks to buy now.
The manufacturing sector stands as a cornerstone of the U.S. economy, significantly contributing to the nation’s gross domestic product (GDP), employment, and technological innovation. According to the National Institute of Standards and Technology (NIST), in 2023, the U.S. manufacturing sector contributed approximately $2.3 trillion to the nation’s Gross Domestic Product (GDP), accounting for about 10.2% of the total U.S. GDP. Additionally, data from the U.S. Bureau of Labor Statistics (BLS) indicated that as of January 2025, the manufacturing sector employs approximately 12.76 million individuals.
Reshoring and Strategic Shifts:
In recent years, the sector has experienced notable trends that are reshaping its landscape. One prominent development is the movement towards reshoring—the practice of bringing manufacturing operations back to the United States. Geopolitical tensions, such as Russia’s invasion of Ukraine, ongoing trade frictions with China, and the aftereffects of the COVID-19 pandemic, have exposed vulnerabilities in global supply chains, prompting companies to reconsider the risks of offshoring. The decline in China’s factory activity and the country’s economic slowdown have also contributed to this shift, as firms seek to reduce their dependency on a single manufacturing hub. In fact, according to a report by CNBC, mentions of “reshoring” in the broader market’s earnings transcripts surged by 128% in the first quarter of 2023 compared to the previous year, outpacing even the rise in discussions about artificial intelligence.
Market Performance and Investment Trends:
Manufacturing stocks have shown resilience over the past year. Despite challenges like inflation and shifting interest rates, the sector has benefited from strong domestic demand and strategic investments in technology. In 2024, greater asset price dispersion across securities, sectors, and countries created strong alpha opportunities for hedge funds. This market dynamic coincided with a significant increase in corporate profits within the U.S. manufacturing sector, which experienced a five-year compound annual growth rate of 11.1%, as reported by NIST.
Outlook and Future Growth Prospects:
The outlook for the U.S. manufacturing sector is cautiously optimistic. Despite ongoing challenges, a focus on innovation and supportive policies position the sector for steady growth. According to a report by Reuters, in January 2025, manufacturing expanded for the first time since 2022, with the ISM manufacturing PMI rising to 50.9—the highest reading since September 2022. Given this, we will take a look at some of the best manufacturing stocks.
Our Methodology
For this list, we first scanned Insider Monkey’s database of 900 hedge funds as of the third quarter of 2024. Our focus was on selecting manufacturing companies across various sub-sectors within the industry, including industrial equipment, automotive, aerospace, and consumer goods. From this pool of companies, we identified the 10 best manufacturing stocks and ranked them in ascending order based on the number of hedge funds holding stakes in them at the end of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A technician in a clean room assembling a semiconductor chip using a microscope.
Applied Materials Inc. (NASDAQ:AMAT)
Number of Hedge Fund Holders: 74
Applied Materials Inc. (NASDAQ:AMAT) is a leader in materials engineering solutions that drive semiconductor chip and advanced display production. The company’s innovative equipment and software are critical to powering next-generation electronics and energy-efficient devices.
As of February 10, 2025, Applied Materials Inc. (NASDAQ:AMAT) has delivered a return of about 12.93% year-to-date, outperforming the broader market’s gain of approximately 3.14%. This strong performance demonstrates the company’s ability to capitalize on rising demand in the semiconductor industry amid rapid technological change and increased data center investments.
In fiscal year 2024, Applied Materials Inc. (NASDAQ:AMAT) reported revenue of approximately $27.2 billion and net income of around $7.2 billion. The company generated robust cash flows, with operating cash flow near $8.7 billion and free cash flow of roughly $7.5 billion. With such healthy metrics, the company continues to expand its portfolio in chip efficiency and advanced display technologies while maintaining a strong balance sheet that supports future innovation.
On January 17, 2025, KeyBanc analyst Steve Barger upgraded the stock from ‘Hold’ to ‘Buy’ and set a price target of $225, citing the company’s strong market position and growth prospects. AMAT is one of the best manufacturing stocks on our list.
Overall, AMAT ranks 8th on our list of best manufacturing stocks to buy now. While we acknowledge the potential for AMAT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AMAT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.