Assessing Applied Materials Stock Amidst Semiconductor Market Volatility

Applied Materials stock has recently declined 10.7% in a month but has climbed 81.1% in three years and 175.7% over five years. Despite some short-term volatility, the company's long-term performance has consistently rewarded patient investors. Valuation checks show Applied Materials scores a 4, indicating it appears undervalued on four out of six measures, suggesting there could still be value even after strong performance.

Applied Materials (AMAT) has recently experienced a significant decline in its stock price, falling 10.7% in just one month. However, over the past three years, the stock has climbed 81.1%, and over five years, it has surged by 175.7%. Despite this short-term volatility, the company's long-term performance has consistently rewarded patient investors.

The total return for AMAT stock over the past 12 months is -15.15%, with a year-to-date return of 1.89%. Over the past five years, the total return is an impressive 177.02%, indicating that a $1000 investment in AMAT stock five years ago would be worth $2,770.21 today [1].

AMAT's recent performance has been impacted by several factors. The company reported strong third-quarter earnings that beat Wall Street estimates, but the stock closed at $161.76, falling -14.07% [2]. This discrepancy can be attributed to the company's expansion costs and geopolitical risks, which have put pressure on its margins [2].

Looking ahead, AMAT's valuation appears undervalued on four out of six measures, suggesting there could still be value even after its strong performance. The company's trailing P/E ratio of ~18x is a discount compared to peers like Lam Research (LRCX) and KLA Corporation (KLAC), which trade at 22x and 25x, respectively [2]. This discount may reflect skepticism about near-term margin resilience but could also represent a buying opportunity for investors who believe in AMAT's ability to sustain its 8% revenue growth trajectory through 2026 [2].

Investors should consider the following strategic considerations:
1. Diversification within the semiconductor supply chain: AMAT's dual exposure to capital equipment (Semiconductor Systems) and services (Applied Global Services) provides a hedge against cyclical downturns.
2. Geopolitical risk mitigation: The company's global manufacturing footprint reduces reliance on any single region, a critical factor as U.S.-China tech tensions persist.
3. R&D leverage: With 36.4% of revenue allocated to R&D in 2025, AMAT is well-positioned to capture value from next-gen technologies like EUV lithography and quantum computing materials [2].

In conclusion, while short-term volatility has impacted AMAT's stock price, the company's long-term fundamentals remain compelling. Investors should monitor its ability to navigate near-term headwinds and maintain R&D momentum. For those with a 3-5 year horizon, AMAT offers a rare combination of defensive qualities and growth potential in a sector poised for decades of expansion.

References:
[1] https://www.financecharts.com/stocks/AMAT/performance/total-return
[2] https://www.ainvest.com/news/applied-materials-q3-2025-earnings-divergent-trends-signal-structural-opportunities-operational-hurdles-semiconductor-boom-2508/