Stock Analysis | Applied Materials Outlook - Technicals Weak as Sector Faces Policy Uncertainty

Market Snapshot – Bearish Momentum Prevails

Applied Materials (AMAT) is under pressure with a recent price drop of 2.84%, matching a bearish trend confirmed by our internal diagnostic score of 2.15, indicating weak technical momentum.

News Highlights – Rising Trade Risks Cloud Outlook

• Trump Announces 100% Tariffs on Semiconductors – The semiconductor sector faces added pressure after former President Donald Trump announced tariffs that could disrupt supply chains. This could weigh on AMAT's business, which supplies critical equipment to chip manufacturers.
• AMAT Strengthens U.S. Manufacturing Ties – In a move to secure its domestic footprint, AMAT announced it will supply equipment to Texas Instruments for Apple products, and is investing $200 million in Arizona. While positive for long-term positioning, the near-term impact on its stock is unclear.
• Broader Industry Comparisons – Competitors like NVIDIA and Broadcom are also being analyzed heavily, with AMAT's position in the sector under increased scrutiny as trade policy uncertainty grows.

Analyst Views & Fundamentals – Mixed Sentiment, Strong Cash Metrics

Analysts remain split, with a simple average rating of 3.00 and a performance-weighted average of 2.03, suggesting a generally neutral to slightly bearish outlook. The ratings are spread out, with no clear consensus.

Our fundamental model scores AMAT at 4.9 (internal diagnostic score), highlighting strong cash flows and efficient operations:

• Net Cash Flow from Operating Activities per Share (YoY): 33.45% – Score: 1
• Net Profit Attributable to Parent Company Shareholders / Net Profit: 100.00% – Score: 1
• Accounts Receivable Turnover Ratio: 2.4982 – Score: 2
• GMAR (Gross Margin After Reserves): 49.08% – Score: 2
• Cash-UP (Cash Usage Performance): 60.91% – Score: 3
• Total Profit (YoY Growth Rate): 3.35% – Score: 0
• Interest Coverage Ratio (EBIT / Interest Expense): 34.64% – Score: 2
• Total Assets Turnover Ratio: 41.93% – Score: 1
• Net Profit Attributable to Parent Company Shareholders (YoY Growth Rate): -11.20% – Score: 3
• Inventory Turnover Days: 136.85 days – Score: 2

Money-Flow Trends – Institutional Optimism, Retail Skepticism

Institutional investors are showing cautious optimism with a block inflow ratio of 51.64% and an overall inflow ratio of 51.26%, while smaller retail investors are still hesitant. Large and extra-large investors have registered positive trends, while small investors are showing a negative trend.

Key Technical Signals – Bearish Chart Patterns Emerge

• Williams %R Oversold Signal (internal diagnostic score 3.11): Indicates potential short-term buying pressure but remains neutral-biased.
• Bearish Engulfing Candlestick (internal diagnostic score 1.19): A strong bearish reversal pattern observed recently on July 29.
• Recent Indicators (July 22–29): Williams %R Oversold appeared frequently, but the Bearish Engulfing pattern on July 29 has turned the technical outlook more bearish.

Overall, the technicals remain weak with 2 bearish indicators and zero bullish ones. Investors should remain cautious in the short term.

Conclusion – Consider Waiting for a Pull-Back

While Applied Materials has strong fundamentals and is positioning itself to support U.S. chip manufacturing, the technical and broader sector headwinds suggest a neutral to cautious stance. With a technical score of 2.15, a fundamental score of 4.9, and rising geopolitical risks, now may not be the best time to initiate new positions. A pull-back or improved technical setup could present a more favorable entry point for investors.