Freedom: Applied Materials correction opens a buying opportunity

Freedom analysts recommend buying Applied Materials (AMAT) shares after the recent correction, with a target price of $470 through December 27, 2026. From the indicative entry price of $408.60, the upside potential is 15.0%. Experts believe that investors’ concerns do not negate the strong demand for chipmaking equipment, as confirmed by industry participants’ results and their customers’ investment plans.

What Applied Materials does

Applied Materials is one of the largest manufacturers of equipment for the semiconductor industry. Its systems are used for deposition, etching, polishing, and process control in the production of processors and memory chips.

Rising chip complexity, the development of memory for artificial intelligence, and new ways of integrating components are expanding demand for the company’s equipment.

Demand for equipment remains strong

Freedom’s main argument is that comments from equipment makers and component suppliers point to the continuation of the investment cycle. On October 21, Lam Research (LRCX) reported a 54% year-over-year revenue increase to a record $8.2 bn. By the company’s preliminary estimate, the wafer fab equipment market (WFE) could grow from about $155 bn in 2026 to more than $200 bn in 2027.

On October 14, ASML (ASML) noted that customers are raising demand forecasts amid AI investments. Some customers intend to place orders as early as 2029–2030, while in 2027–2028 capacity may be insufficient to meet all demand.

An additional signal came from Ultra Clean Holdings (UCTT), about 60% of whose revenue is tied to Applied Materials and Lam Research. On October 27, the company reported a 49% year-over-year revenue increase to a record $759 mn. For Q4, it forecasts a further 9% sequential increase and also expects the WFE market to exceed $200 bn in 2027.

Industry forecasts may be revised upward

According to industry association SEMI, global semiconductor equipment sales in Q2 2026 rose 23% year over year to a record $40.5 bn.

SEMI’s July forecast projected WFE sales to rise 23% to $143.9 bn in 2026 and another 22% in 2027. In its October outlook, the association expects double-digit growth in spending on equipment for fabs running 300-mm wafers through 2029—up to $227 bn.

Freedom analysts note that SEMI’s 2027 forecast—about $175 bn by their calculations—is below the guidance from Lam Research and Ultra Clean Holdings. This creates room for an upward revision.

In the experts’ view, a temporary component shortage, which was one of the triggers for the sell-off, does not change the fundamental demand picture. The 33% increase in fab construction spending expected by SEMI for 2027 should ease the shortage of cleanrooms—special production areas with controlled contamination levels.

After a 31% drop, signs of recovery have emerged

Since October 5, Applied Materials shares have fallen 31%—from $542 to $376. Freedom links this to the absence of a 2027 WFE forecast at SEMICON West, Lam Research’s comments about component shortages, and concerns about the durability of AI investment.

After testing the $373–377 support zone, the stock bounced 6%. By the close on October 27, the relative strength index (RSI) rose from 25 to 34, moving out of oversold territory. Other technical indicators also showed improving momentum.

Analysts view these changes as signs that the correction is ending. A breakout above the $406–409 resistance level, in their view, would confirm a reversal and open the way toward moving averages in the $443–463 range.

Investment idea terms

The target price for Applied Materials in the new two-month idea is $470, with an indicative entry price of $408.60. Analysts recommend setting a stop-loss at $370 and limiting the position size to 2% of the portfolio. The idea’s risk is assessed as high.

The nearest catalysts could be Applied Materials’ Q4 FY2026 report on November 12 and SEMI’s December forecast. In the reporting, experts expect guidance for 2027.

Latest results of Applied Materials

In Q3 FY2026, Applied Materials’ revenue reached a record $9.12 bn, up 25% year over year from $7.30 bn. Net income rose 43% to $2.54 bn from $1.78 bn. Adjusted earnings per share increased 41% to a record $3.50, and the adjusted operating margin expanded from 30.7% to 34.0%.

The company generated $3.04 bn in operating cash flow and returned $860 mn to shareholders: $440 mn through share buybacks and $420 mn in dividends. In an August note, Freedom maintained a “Buy” recommendation with a target price of $664. The October publication presents a separate investment idea with a two-month horizon and a $470 target.

Not an individual investment recommendation.