What Happened?
Shares of semiconductor machinery manufacturer Applied Materials (NASDAQ:AMAT) jumped 8.2% in the afternoon session after Taiwan Semiconductor Manufacturing Co. (TSMC), a major customer, announced a significant increase in capital spending plans and a robust revenue growth forecast for 2026, lifting the entire chip equipment sector.
The positive forecast from the world's largest chip manufacturer signaled strong demand ahead. This directly benefited equipment suppliers like Applied Materials, which provides the tools needed for chip production. The optimism spread to Wall Street, where analysts reacted positively. An analyst from Stifel maintained a 'Buy' rating on the stock and increased the price target substantially to $340 from $250. Additionally, RBC Capital set a new price target of $385 for Applied Materials, reflecting increased confidence in the company's prospects.
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What Is The Market Telling Us
Applied Materials’s shares are quite volatile and have had 18 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 7 days ago when the stock dropped 4% on the news that a broader market rotation out of the technology sector led to profit-taking following a recent rally.
The move was part of a wider trend that saw high-growth technology stocks fall, with the Nasdaq experiencing the sharpest decline among the major indices. Multiple reports indicated that traders were locking in profits, particularly from the artificial-intelligence trade, which had previously seen a strong run-up. This market action represented a shift in investor focus, as money moved out of tech. Defense stocks emerged as the primary beneficiary of this capital shift, surging after President Trump proposed a massive $1.5 trillion defense budget for 2027. Major contractors rallied on the news, with Northrop Grumman jumping over 10% and Lockheed Martin gaining nearly 8%, providing a counterbalance to the tech slump that kept the S&P 500 flat. The rotation into heavy industry was further supported by a stabilization in energy markets, as crude prices rebounded.
Applied Materials is up 21.4% since the beginning of the year, and at $326.53 per share, has set a new 52-week high. Investors who bought $1,000 worth of Applied Materials’s shares 5 years ago would now be looking at an investment worth $3,166.
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