Applied Materials Surges 6.85% on TSMC's Bold Capex Plan – What's Next for the Semiconductor Giant?

Summary
• TSMC's 2026 capital spending plan surges to $56 billion, triggering a 8.2% rally in Applied Materials
• Barclays upgrades AMAT to Overweight, citing undervalued China exposure and HBM growth potential
• Zacks assigns AMAT a 'B' VGM Score, signaling strong earnings momentum and growth prospects

Applied Materials (AMAT) has surged 6.85% intraday to $322.59, hitting its 52-week high of $330.9999. The rally follows TSMC's blockbuster Q4 earnings and aggressive capex forecast, which ignited optimism across the semiconductor equipment sector. With 8.4 million shares traded and a 1.06% turnover rate, the move reflects a strategic re-rating of AMAT's role in the AI-driven chip manufacturing boom.

TSMC's Capital Spending Catalyst Ignites AMAT Rally
Applied Materials' 6.85% intraday surge stems directly from TSMC's $56 billion 2026 capital expenditure plan, announced alongside its Q4 earnings beat. As a critical supplier of wafer fabrication equipment, AMAT stands to benefit from TSMC's accelerated investment in advanced node production. The move aligns with Barclays' upgrade, which argues China-related concerns are overblown and HBM demand will drive AMAT's growth. Analysts at Stifel and RBC Capital raised price targets to $340 and $385, respectively, while Zacks' 1.6% earnings growth forecast for FY2026 reinforces the bullish narrative.

Semiconductor Equipment Sector Rallies as AI Demand Gains Momentum
The semiconductor equipment sector is experiencing synchronized strength, with ASML (ASML) surging 5.93% and Lam Research (LRCX) rising 6.5%. TSMC's capex guidance has validated the sector's core thesis: AI-driven demand for advanced manufacturing tools. AMAT's 55% 6-month outperformance versus the 23.5% industry average underscores its leadership position in HBM and hybrid bonding technologies. While ASML dominates lithography, AMAT's broad product portfolio and hybrid bonding innovation position it uniquely to capture both foundry and DRAM spending cycles.

Options Playbook: High-Leverage Calls and Strategic Puts for AMAT's Volatile Move
• MACD: 13.44 (bullish divergence), Signal Line: 10.43, Histogram: 3.01 (momentum acceleration)
• RSI: 72.34 (overbought but supported by strong earnings)
• Bollinger Bands: Price at 322.59 (above upper band 313.71, indicating breakaway strength)
• 200D MA: 197.82 (far below current price, confirming long-term bullish trend)

Technical indicators suggest AMAT is in a short- and long-term bullish phase. Key resistance lies at the 52-week high of $330.9999, with support at the 30-day MA of $258.88. The 72.34 RSI reading indicates overbought conditions, but the 3.01 MACD histogram suggests momentum remains intact. With ASML's 5.93% rally reinforcing sector strength, AMAT's rally appears structurally supported by AI infrastructure spending.

Top Call Option: AMAT20260123C325
• Contract Code: AMAT20260123C325
• Type: Call
• Strike Price: $325
• Expiration: 2026-01-23
• IV: 40.48% (moderate volatility)
• Leverage Ratio: 47.72% (high gearing)
• Delta: 0.4527 (moderate sensitivity)
• Theta: -0.9935 (rapid time decay)
• Gamma: 0.019374 (strong price sensitivity)
• Turnover: $129,231

This contract offers 47.72% leverage with a 40.48% implied volatility, ideal for capitalizing on AMAT's 52-week high breakout. The 0.45 delta balances directional exposure with time decay, while the 0.0193 gamma ensures responsiveness to price swings. Under a 5% upside scenario (target $339.72), payoff would be $14.72 per contract, yielding a 113% return on premium paid.

Top Put Option: AMAT20260123P310
• Contract Code: AMAT20260123P310
• Type: Put
• Strike Price: $310
• Expiration: 2026-01-23
• IV: 38.77% (reasonable volatility)
• Leverage Ratio: 102.43% (high downside protection)
• Delta: -0.2579 (moderate bearish exposure)
• Theta: -0.0094 (minimal time decay)
• Gamma: 0.016498 (moderate price sensitivity)
• Turnover: $135,239

This put offers 102.43% leverage with a 38.77% IV, providing robust downside protection if AMAT's momentum stalls. The -0.2579 delta limits directional risk while the 0.0165 gamma ensures responsiveness to volatility shifts. In a 5% downside scenario (target $306.46), payoff would be $3.54 per contract, offering a 34% return on premium paid.

Aggressive bulls should consider AMAT20260123C325 into a breakout above $330.9999, while cautious investors may hedge with AMAT20260123P310 to protect gains.

Backtest Applied Materials Stock Performance
The backtest of AMAT's performance after a 7% intraday surge from 2022 to the present indicates positive short-to-medium-term gains. The 3-Day win rate is 51.79%, the 10-Day win rate is 56.35%, and the 30-Day win rate is 59.52%, suggesting that the stock tends to perform well in the immediate aftermath of such events. The maximum return observed was 5.70% over 30 days, which implies that while the stock may not always capitalize on the full 7% increase immediately, it often generates respectable gains in the following days.

Bullish Momentum Unlikely to Subside – Position for AMAT's Next Move
Applied Materials' 6.85% rally is structurally supported by TSMC's capex surge and AI infrastructure spending. With ASML's 5.93% surge reinforcing sector strength, AMAT's 52-week high breakout appears sustainable. Investors should monitor the $330.9999 level for confirmation of a new upward trend. The 72.34 RSI reading suggests overbought conditions, but the 3.01 MACD histogram indicates momentum remains intact. Positioning in high-leverage calls like AMAT20260123C325 offers asymmetric upside potential, while puts like AMAT20260123P310 provide prudent downside protection. Watch for ASML's 5.93% rally to validate the sector's AI-driven re-rating.