Santa Clara, California – The demand for chips that power artificial intelligence (AI) models is surging as governments and tech companies worldwide race to implement AI applications. Nvidia has experienced a significant increase in revenue and earnings in recent quarters due to this demand.
Nvidia’s AI GPUs are in such high demand that customers are facing wait times of up to 52 weeks for deliveries of its flagship H100 processors. To meet this demand, the chipmaker is planning to increase production capacity for these AI chips, which could help sustain its share price rally.
Despite Nvidia’s impressive gains over the past year, some investors may be looking for more affordable investments to capitalize on the AI boom. Applied Materials, a company benefiting from Nvidia’s efforts to boost AI chip production, could be a promising option for these investors.
Applied Materials specializes in manufacturing equipment for chipmakers, with major clients including Samsung, Taiwan Semiconductor Manufacturing, and Intel. The increasing semiconductor spending by these companies is expected to benefit Applied Materials, as demonstrated by its better-than-expected fiscal results.
In its fiscal 2024 first-quarter results, Applied Materials reported flat year-over-year revenue but exceeded Wall Street estimates for non-GAAP earnings. The company’s guidance for the next quarter also surpassed analysts’ expectations, citing a rise in capital investment by cloud companies and increasing fab utilization across all device types.
The growing deployment of AI data centers is expanding Applied Materials’ market opportunity, particularly in high-bandwidth memory (HBM) and advanced chip packaging. The company forecasts significant revenue growth in these areas, driven by the increasing adoption of AI technologies.
Applied Materials’ optimistic outlook for fiscal 2024, with a projected revenue of $26.1 billion, suggests a potentially strong performance in an improving spending environment. Analysts anticipate a rise in revenue and earnings for fiscal 2025, indicating positive growth prospects for the company.
With Applied Materials trading at a lower multiple of trailing earnings compared to Nvidia, conservative investors looking for a more affordable AI stock may find Applied Materials an attractive option. The company’s recent performance and growth opportunities in the semiconductor industry position it well for future success and potential stock price increases.