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Applied Materials: The Semiconductor Play Fueling Chase Coleman's AI Bet

Harrison BrooksSunday, May 4, 2025 5:51 pm ET

15min read

In the high-stakes world of tech investing, few sectors are hotter than semiconductors—and few investors are more influential than Chase Coleman, founder of Tiger Global Management. Among his recent bets is Applied Materials (AMAT), a company he sees as a critical enabler of the AI revolution. Here’s why this $63 billion industrial giant could be a cornerstone of long-term growth—and how Coleman’s contrarian strategy is positioning investors to profit.

Why Applied Materials? The AI Supply Chain Play

Applied Materials designs and builds the tools that make semiconductors possible. From etching nanoscale circuits to depositing materials in next-gen chips, AMAT’s machines are essential to manufacturers like Intel, TSMC, and Samsung. With artificial intelligence driving exponential demand for advanced chips—especially for GPUs, AI accelerators, and 5G infrastructure—Coleman’s bet on AMAT is a bet on the foundational infrastructure of the AI economy.

The math is compelling: global semiconductor sales are projected to grow at a 6.4% CAGR through 2030, with AI-driven demand accounting for nearly 40% of that growth by 2027, per Gartner. AMAT’s 2023 revenue of $23.8 billion (up 12% year-over-year) already reflects this trend, with its Semiconductor Systems segment contributing 61% of sales.

Coleman’s Contrarian Move: Buying When Others Are Selling

While institutional investors overall reduced their AMAT holdings by 3.13% in Q1 2025 (per 13F filings), Tiger Global Management did the opposite. The firm initiated a $211 million position in AMAT, acquiring 895,000 shares—a clear signal of confidence in its long-term prospects. This contrasts with broader market skepticism: AMAT’s stock dipped 10% in early 2025 amid tech-sector volatility, even as its fundamentals held firm.

The chart highlights AMAT’s resilience, outperforming the broader market by 15% over the past year despite macroeconomic headwinds. This stability aligns with Coleman’s strategy of buying undervalued assets in cyclical industries during downturns.

Key Catalysts for Growth

AI Hardware Demand:
AMAT’s equipment is critical for producing chips with 7nm and smaller geometries, which are essential for AI applications. NVIDIA’s AI-specific GPUs, for instance, require fabrication capabilities that only AMAT’s tools can support.
Global Chip Manufacturing Boom:
Governments and corporations are investing $150 billion in new semiconductor factories globally by 2030 (SEMI). AMAT supplies 80% of the equipment for these facilities, ensuring recurring revenue streams.
Valuation Advantage:
AMAT trades at a 14.2x P/E ratio, below its 5-year average of 17.8x. With a 10% ROIC (Return on Invested Capital) and $3.2 billion in cash, it has the financial flexibility to invest in R&D or acquire niche competitors.
Diversified Revenue Streams:
While 60% of revenue comes from semiconductors, AMAT’s display, solar, and service divisions add stability. Its Atomic Layer Deposition (ALD) technology, used in advanced packaging, is a game-changer for 3D chip stacking—a key AI enabler.

Risks and Considerations

Cyclical Volatility: The semiconductor industry is prone to boom-bust cycles. A slowdown in AI adoption or a recession could pressure margins.
Competitor Intensity: Lam Research (LRCX) and ASML (ASML) are direct rivals, though AMAT’s broader portfolio offers a moat.
Trade Policy Risks: Geopolitical tensions, such as U.S.-China chip export restrictions, could disrupt supply chains.

Conclusion: AMAT’s 20% Upside Potential

Chase Coleman’s $211 million bet on AMAT isn’t just about short-term gains—it’s a strategic play on the $1.2 trillion AI hardware market. With a 20% upside potential (based on 16 analysts’ price targets) and a 4.2% dividend yield, AMAT offers both growth and income.

The numbers back this thesis:
- AMAT’s backlog of $10.2 billion (as of Q1 2025) ensures visibility for 2024 earnings.
- Its $1 billion R&D spend in 2023 is fueling innovations like EUV lithography and carbon nanotube transistors, which will power AI’s next phase.

Coleman’s history speaks for itself: his early stakes in Facebook (now Meta) and LinkedIn generated multi-bagger returns. Applied Materials, a pillar of the AI supply chain, could be his next major win. For investors willing to think long-term, this stock is more than a semiconductor play—it’s a bet on the future of technology itself.

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