Applied Materials’ AMAT advanced packaging has emerged as a major growth engine as the rapid build-out of AI computing infrastructure increases the need for higher system performance, power efficiency and cost optimization. In the advanced packaging space, AMAT has strong positions in high-bandwidth memory and 3D chiplet stacking. The company is well-positioned for upcoming packaging inflections.
AMAT is expected to gain tremendously as the data center memory space remains among the most supply-constrained markets amid the massive demand. The eventual ramp-up of memory chip production gives AMAT an edge throughout 2026 and 2027 as it is one of the leading process equipment suppliers in advanced packaging. The company expects its packaging revenues to grow more than 50% in 2026.
Applied Materials’ advanced packaging, alongside leading-edge foundry-logic and DRAM, are one of the three markets with the greatest impact on AI computing. Together, these areas are expected to account for more than 80% of year-over-year wafer fab equipment spending growth in 2026, with a similar profile expected in 2027.
AMAT already offers what it describes as the industry’s broadest portfolio for the emerging panel trend, spanning chemical vapor deposition, etch, physical vapor deposition, digital lithography, electrochemical deposition, and e-beam metrology and test. Now it plans to strengthen this portfolio through its acquisition of the NEXX business from ASMPT.
The combined portfolio of NEXX and AMAT is designed to help chipmakers and systems companies build larger AI accelerators with higher energy-efficient performance. Collaboration is another important element of Applied Materials’ packaging strategy. Through the EPIC Center, AMAT and SK hynix plan to work on next-generation DRAM, HBM and 3D advanced packaging. These factors establish AMAT at a sweet spot in the packaging business.
How Competitors Fare Against AMAT
AMAT’s broad portfolio positions the company to capture a larger share of customer spending as semiconductor manufacturing becomes increasingly materials-intensive while also keeping its competitors like Lam Research LRCX and Camtek CAMT at bay. The breadth of Applied Materials' portfolio also reduces its dependence on any single semiconductor technology cycle and supports stronger pricing power.
Camtek focuses on semiconductor inspection, metrology, advanced packaging and high-performance computing applications. Lam Research competes with Applied Materials across deposition and etch technologies, including advanced atomic layer deposition systems used in leading-edge semiconductor manufacturing.
AMAT’s Price Performance, Valuation and Estimates
Shares of Applied Materials have surged 115.7% year to date compared with the Zacks Electronics - Semiconductors industry’s growth of 40.4%.
AMAT YTD Performance Chart
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From a valuation standpoint, Applied Materials trades at a forward price-to-sales ratio of 11.26X, higher than the industry’s average of 8.77X.
AMAT Forward 12-Month (P/S) Valuation Chart
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The Zacks Consensus Estimate for Applied Materials’ fiscal 2026 and 2027 earnings implies year-over-year growth of 28% and 32%, respectively. The estimates for fiscal 2026 have been revised upward over the past 30 days.
Image Source: Zacks Investment Research
Applied Materials currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).