Investors are bailing on Applied Materials (AMAT) following reports that OpenAI missed internal revenue and user growth targets — sparking fears of a cooling AI infrastructure cycle.
This negative surprise made AMAT break below its 20-day moving average (MA) this morning, signaling bearish momentum will likely sustain in the near term.
Despite the pullback, however, Applied Materials stock remains up a whopping 43% year-to-date.
Significance of OpenAI News for Applied Materials Stock
The OpenAI news is a significant threat to the semiconductor equipment narrative. Why? Because it’s the primary buyer of the high-end chips manufactured using AMAT tools.
If the AI research lab itself is seeing growth slow down, as the Wall Street Journal signaled in its report on April 28, this means that the compute-at-scale phase may be hitting a bottleneck.
Chipmakers will slow orders for Applied Materials’ extreme ultraviolet (EUV) and gate-all-around (GAA) equipment if the software side of AI can’t monetize fast enough to justify trillion-dollar investments in hardware.
It’s this mismatch that’s hurting sentiment on AMAT shares today.
Should You Buy the Dip in AMAT Shares Today?
While the OpenAI headlines are jarring, savvy investors should treat this as a healthy reset instead of a structural collapse.
Applied Materials shares stand to benefit from long-term tailwinds, specifically the shift to the 2nm process node and high-bandwidth memory (HBM), which are non-negotiable for the AI industry’s survival.
AMAT’s dominance in wafer fab equipment ensures it will capture the next leg of growth as Intel (INTC) and Samsung expand their production facilities.
Applied Materials is currently trading at about 37x forward earnings, which isn’t particularly expensive for a company riding the AI wave with gross margins at a robust 49%.
A 0.56% dividend yield makes up for another great reason to stick with AMAT for the long term.
Wall Street Remains Bullish on Applied Materials Inc
Investors should also note that Wall Street analysts remain bullish as ever on Applied Materials.
According to Barchart, the consensus rating on AMAT stock sits at “Strong Buy” currently, with price targets as high as $500, indicating potential upside of more than 30% from here.
On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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