3. Applied Materials Inc. (NASDAQ:AMAT)
Moore Global Investments’ Stake: $48.79 million
Number of Hedge Fund Holders: 80
Average Upside Potential as of May 2: 37.62%
Applied Materials Inc. (NASDAQ:AMAT) provides manufacturing equipment and services. It also offers software to the semiconductor, display, and related industries. The company operates through three segments: Semiconductor Systems, Applied Global Services, and Display. It operates in the US, China, Korea, Taiwan, Japan, Southeast Asia, Europe, and internationally.
In Q1 2025, the company’s Semiconductor Systems segment generated $5.36 billion in sales, which marked a 9% year-over-year increase. This was fueled by a 20% surge in foundry logic sales, which benefit from the industry’s transition to advanced nodes like gate-all-around transistors and backside power delivery. Applied Materials Inc. (NASDAQ:AMAT) estimates that this transition alone expands the company’s total available market by over 15%.
For Q2 2025, the company projects Semiconductor Systems revenue to be ~$5.3 billion, with an 8% growth year-over-year. Jefferies analysts recently upgraded the stock to Buy from Hold with a $195 price target, up from the previous target of $185. This upgrade was backed by recovering demand, which can help the company’s stock to continue to rise despite the US-China trade tensions.
Vltava Fund viewed the company as a strong tech company with excellent profitability, cash flow, and growth potential, and stated the following regarding Applied Materials, Inc. (NASDAQ:AMAT) in its Q4 2024 investor letter:
“In the quarter just ended, we added to the portfolio two new companies from the technology sector: Applied Materials, Inc. (NASDAQ:AMAT) and Lam Research. Both are in the same industry as is another of our investments that we have held for some time, KLA Corporation. This industry is termed semiconductor devices and materials. One chapter in Hidden Investment Treasures is devoted to investing in technology companies and, among other things, the controversy over what really constitutes a technology company. As investors, we try to view technology companies not according to the industry into which they are formally classified but by whether the technologies and technological processes used in the production of their products and services are an essential element in value creation or if they are a source of long-term, sustainable competitive advantage. Among the companies that are formally categorized as technology-based and fall into either the Information Technology or the Communications Services sector, we find some that can be said to be just that but also others for which this classification is at least debatable. Similarly, among companies that do not formally belong to these two sectors, we find many that clearly are built to a large extent on technology and base their market positions and competitiveness on it. In the cases of Applied Materials and Lam Research, there can be no doubt that these are technology companies not only as a formality but also in fact.
Applied Materials provides manufacturing equipment, services, and software for the semiconductor, display, and related industries. Its principal business activities are semiconductor systems and Applied Global Services. Its largest customers are Samsung and Taiwan Semiconductors, but its overall clientele is more diversified than is that of Lam Research. At first glance, it would appear that Applied Materials has a somewhat less tangible and definable competitive advantage compared to KLA Corporation and Lam Research, but the numbers do not support such a view. Net margins likewise in the neighborhood of 27% and ROCE around 30% are outstanding. Basically, it can be said that all three companies we own have very similar underlying profitability metrics. Even their valuations, growth, and potential are similar. All have strong free cash flow and strong balance sheets, and they are regularly buying back their own shares over the long term and in large volumes…” (Click here to read the full text)
