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Hype Asset of the Day | October 20th, 2022

Updated: Oct 24, 2022



Applied Materials, Inc. (NASDAQ: AMAT)

Applied Materials, Inc. is a corporation registered in America that supplies equipment, services and software for the manufacture of semiconductor (integrated circuit) chips for electronics, flat panel displays for computers, smartphones, televisions, and solar products. With its resilience through prevalent macroeconomic headwinds, the company has seen an increase in mentions by 194% over the last day, prompting investors to wonder what makes the company worth investing in. Currently, shares of Applied Materials trade at $77.33 each.

Positive Hype

Applied Materials is a company that has done very well for itself, featuring high growth despite macroeconomic headwinds, here are some of the reasons you might want to consider taking a position in the company now.


  • Revenue has nearly tripled over the last 10 years, and more growth is expected as the leading chip companies continue to plough more resources into new chip technologies.


  • Applied Materials has hauled in $25 billion in revenue over the last reported 12-month period.


  • As of last week, Micron also wants to build new memory chips in New York, and a sizable chunk of that $100 billion spending outlay could go the way of Applied Materials.


  • At the midpoint of prior guidance, Applied Materials had called for revenue of $6.65 billion. Thus, a $400 million negative impact is a manageable 6% decline in quarterly sales.


  • Plus, the stock currently offers a 1.4% dividend yield, and the company is a prolific share repurchaser, which only sweetens the deal.

  • The semiconductor industry should still continue to expand over the long term as more advanced consumer electronics, data centres, cars, robots, and other products gobble up more chips. Therefore, Applied Materials stock still looks very cheap at 10 times forward earnings.


  • In the wake of the pandemic, the U.S. has seen the need to bring some of its semiconductor supply home, which is also good news for Applied Materials.


  • While Applied Materials works to overcome supply chain problems, its backlog has continued to grow. This could be a great buying opportunity, with the semiconductor industry's revenues expected to reach $1 trillion before the end of the decade.


Negative Hype

Although there are lots of very good reasons to be picking Applied Materials up now, no investment is perfect and here is one of the reasons Applied Materials might not be.

  • Amidst a growing economic slowdown and worries of a looming recession, the U.S. recently announced new export curbs on advanced chips and chip manufacturing equipment to China, where Applied Materials has one-third of its revenue coming from.


  • With just a couple of weeks to go, the company cut right to the chase and said the new U.S. chip and equipment bans will reduce its fourth-quarter revenue by $400 million, plus or minus $150 million.

Conclusion

Simply put, the diversified nature of the semiconductor market allowed Applied Materials to perform well despite headwinds such as a broken supply chain and softness in chip demand from certain niches. By itself, Applied Materials has been doing well financially, and that’s likely to continue. Additionally, with semiconductor capital spending expected to remain solid thanks to the growing demand for chips, Applied Materials looks set for secular long-term growth.



HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.

The algorithm for our proprietary HypeIndex score is based on sentiment analysis, data science and machine learning.




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