Applied Materials (Applied Materials (AMAT)) is gearing up for what looks like a multi-year growth spurt, and JPMorgan is on board. The chip equipment maker could see its semiconductor systems revenue jump about 40% this year, according to the bank, as AI keeps fueling demand for advanced chips.
Analyst Harlan Sur reiterated an Overweight rating on the stock with a $660 price target. The call came after a Thursday meeting with Mike Sullivan, Applied Materials' corporate vice president and head of investor relations.
Stronger Chip Equipment Demand
Sullivan said the roughly 40% year-over-year growth in the Semiconductor Systems business looks achievable this year. Demand has actually strengthened over the past 13 weeks, though limited cleanroom space at customers could put a cap on further upside.
To prepare for the future, the company plans to expand manufacturing capacity to support as much as twice its recent systems output by 2028. But Sullivan was quick to note that this shouldn't be read as a forecast for semiconductor equipment spending. Instead, it's about having enough capacity to meet demand if the industry grows faster than expected. The company has more than eight quarters of visibility through its backlog and customer forecasts.
AI Drives Most of the Growth
Applied Materials is also feeling more confident about the 2027 wafer fabrication equipment outlook. Customer forecasts now stretch into the first half of 2028, and some customers are even talking about plans through 2030.
AI-related markets, including leading-edge logic, DRAM, and advanced packaging, are driving about 80% of wafer fabrication equipment growth this year. The company expects a similar mix in 2027.
DRAM is becoming a bigger opportunity, too. Applied Materials estimates its revenue opportunity for every 100,000 greenfield wafer starts per month could climb from about $6 billion at 6F² technology to $6.5 billion at 4F², and up to $7.5 billion with 3D DRAM.
Meanwhile, Sullivan highlighted that value-based pricing is gaining importance as the company looks to capture more of the economic benefits its equipment delivers through better chip performance, yields, and throughput.
AMAT Price Action: Applied Materials shares were down 0.67% at $492.85 at the time of publication on Thursday.
