Trim AMAT 40-45% into $525-540 zone; maintain 60-70% benchmark weight with defined risk at $436 support
Three converging risks justify reduction: (i) Q2 FCF collapse of -90% YoY to $0.21B undermines buyback engine justifying premium valuation, (ii) medium-term trend broken with price below 50 SMA ($560), MACD line negative at -6.96, and RSI at 33.6 signaling no capitulation, and (iii) macro regime structurally hostile — 30Y yields at 19-year highs, Jackson Hole hawkish risk in 10 days, and tightening China BIS export controls argue against peak multiples for cyclically-vulnerable EPS. The asymmetric trade is to trim into relief rallies and rotate into less-extended AI infrastructure (ASML, diversified semi ETF) rather than fully liquidate, given intact 200 SMA support at $391 and validated secular AI capex tailwinds.
| Position | Action |
|---|---|
| First test of $525 with rising volume | ~20% reduction |
| Second failed test of $525 | ~10-15% reduction |
| Post-Jackson Hole (Aug 28) repricing window | Reserve final ~10-15% for execution |
| Do NOT tighten stop to $470 against ATR of $35.65 (1.2 ATR is guaranteed shakeout) | Maintain stop at $436 (July 29 panic low / major tested support) |
AMAT's violent drawdown is a gift, not a warning — record revenue, raised guidance, 41% ROE, near-zero leverage, and MACD positive divergence create a generational entry point at $514.
| Indicator | Value | Signal |
|---|---|---|
| close_10_ema | 525.61 | bearish |
| close_50_sma | 560.78 | bearish |
| close_200_sma | 391.16 | bullish |
| rsi | 46.58 | neutral |
| macd | -6.96 | bearish |
| macd_signal | -8.14 | bearish |
| macd_histogram | +1.18 | bullish |
| atr | 35.65 | neutral |
| vwma | 524.87 | bearish |
| bollinger_upper | 579.05 | neutral |
| bollinger_middle | 522.26 |
This report is AI-generated for informational and educational purposes only and is not investment advice or a recommendation to buy or sell any security. Full disclaimer.
When: 50 SMA ($560) reclaim with rising volume
Then: Re-evaluate for re-add
EV: +25% (path to $640+ at 35x forward earnings) · concedes: China export controls are a real risk; Premium multiple compression is possible if market conditions deteriorate; A hawkish Fed poses a genuine headwind for long-duration tech; Consensus EPS estimates may be too optimistic; The 41% drawdown and ugly chart are real, not illusions
AMAT is a high-quality business at the wrong price—after a 300% parabolic run, with margins stalling, FCF collapsed 90% YoY, and a 28x forward P/E that requires peak-cycle assumptions that historically coincide with the worst forward returns.
EV: Bear target: $312 (20x multiple × $15.59 on 15% EPS miss); Fair value range: $330-400; Interesting entry: $400; Buy territory: $300
→ vs conservative: ROE of 41% and fortress balance sheet with near-zero net debt are irrelevant when FCF stays suppressed; the 90% payout ratio math that justified premium multiple breaks if FCF remains suppressed for two more quarters
→ vs conservative: 200 SMA intact at 391 with price 31.5% above it is false comfort—comparing it to 'foundation is fine while building is on fire'
→ vs conservative: China was historically 30%+ of revenue and tightening BIS export controls create a structural revenue ceiling being lowered while stock trades at premium multiple; consensus has not fully priced this risk
→ vs neutral: MACD histogram positive at 1.18 is a bull trap in slow motion—the MACD line itself remains negative at minus 6.96 and below zero; positive histogram is just signal line catching up to still-declining MACD, not accumulation
→ vs neutral: Record quarter, raised guidance, stock fell 6% on print is definitive distribution phase signal—not accumulation as neutral framing suggests
→ vs neutral: Wait-for-confirmation crowd will face 30-year yields at 19-year highs, Jackson Hole August 28, 85% Polymarket odds of no Fed cuts; confirmation in this hostile macro regime becomes a 10% gap-down gap you cannot exit cleanly
→ vs neutral: If RSI does hit 30 again, macro deterioration will be so bad the stock will not stop at 436—waiting for capitulation means waiting at bottom with bags
| bollinger_lower | 465.46 | neutral |
Support: 436.45 · 465.46 · 497.73 · 507.37 | Resistance: 525.61 · 560.78 · 579.05
AMAT is in a post-parabolic base-building phase, having collapsed ~41% from its $739.67 June 30 high to $436.45 on July 29, then stabilizing in the $500–$560 zone with the latest verified close at $514.33. The technical picture is mixed: the long-term 200 SMA (391.16) remains bullish at +31.5% distance, but both short-term averages (10 EMA at 525.61, 50 SMA at 560.78) are overhead resistance with price below both. The MACD histogram at +1.18 represents an early bullish divergence — the first positive reading since early July — though the MACD line (-6.96) remains below zero and hasn't crossed its signal line (-8.14) yet. RSI at 46.58 is deep neutral territory, having oscillated between 33.6 and 53.9 over 30 sessions with no capitulation at the recent lows. ATR is still elevated at 35.65 (~6.9% daily range), down from the 47.17 peak but still 2–3x normal, warranting smaller position sizing and wide stops (~$71 for a 2× ATR stop). VWMA at 524.87 has been declining from 629.43 on July 2, confirming distribution phase, but has flattened over the last 7 sessions suggesting selling pressure may be exhausting.
Market Cap
$408.4 B
Share Price
~$514.6
52-Week High
$739.67
52-Week Low
$154.47
50-Day MA
$559.56
200-Day MA
$390.21
P/E (TTM)
44.26x
Forward P/E
28.04x
Forward EPS
$18.34
PEG Ratio
1.09
Price / Book
15.94x
Dividend Yield
0.40%
Beta
1.618
TTM Revenue
$30.84 B
TTM Gross Profit
$15.23 B
TTM Gross Margin
49.4%
TTM EBITDA
$10.15 B
TTM EBITDA Margin
32.9%
TTM Net Income
$9.27 B
TTM Net Margin
30.1%
TTM Operating Margin
33.7%
Return on Equity (TTM)
41.1%
Return on Assets (TTM)
15.5%
Q2 FY2026 Revenue
$7.91 B
Q2 FY2026 Gross Profit
$3.95 B
Q2 FY2026 Operating Income
$2.52 B
Q2 FY2026 Net Income
$2.81 B
Q2 FY2026 Diluted EPS
$3.51
YoY Revenue Growth (Q2 FY26)
+11.4%
QoQ Revenue Growth (Q2 FY26)
+16.3%
YoY Net Income Growth (Q2 FY26)
+31.3%
QoQ Net Income Growth (Q2 FY26)
+38.5%
R&D Spending (Q2 FY26)
$1.03 B
SG&A (Q2 FY26)
$397 M
FY2025 Revenue
$28.37 B
FY2025 Gross Margin
48.7%
FY2025 Net Income
$7.00 B
FY2025 Diluted EPS
$8.66
FY2025 OCF
$7.96 B
FY2025 FCF
$5.70 B
FY2025 CapEx
$2.26 B
FY2024 Revenue
$27.18 B
FY2024 Net Income
$7.18 B
FY2024 Gross Margin
47.5%
FY2023 Revenue
$26.52 B
FY2023 Net Income
$6.86 B
FY2023 Gross Margin
46.7%
FY2022 Revenue
$25.79 B
FY2022 Net Income
$6.53 B
FY2022 Gross Margin
46.5%
Cash & ST Investments (Q2 FY26)
$8.24 B
Cash & Equivalents (Q2 FY26)
$6.30 B
Total Debt (Q2 FY26)
$7.27 B
Net Debt (Q2 FY26)
$0.15 B
Inventory (Q2 FY26)
$6.34 B
Receivables (Q2 FY26)
$6.81 B
Total Assets (Q2 FY26)
$40.29 B
Stockholders' Equity (Q2 FY26)
$23.91 B
Working Capital (Q2 FY26)
$13.57 B
Current Ratio (Q2 FY26)
2.42x
Equity Book Value FY2022
$12.19 B
Equity Book Value FY2025
$20.42 B
FY2025 Share Repurchases
$4.90 B
FY2025 Dividends Paid
$1.38 B
Diluted Share Count (FY2022)
877 M
Diluted Share Count (FY2025)
808 M
Diluted Share Count (Q2 FY26)
799 M
Share Count Reduction (4-year)
-9%
TTM FCF
$3.20 B
Q2 FY2026 FCF
$0.21 B
CapEx Q2 FY26
$635 M
M&A Q2 FY26
$175 M
Strengths
Concerns
Applied Materials is a high-quality semiconductor equipment leader with best-in-class margins (30.1% net margin, 41.1% ROE) and a fortress balance sheet (near-zero net debt). Q2 FY2026 delivered a blowout quarter with $7.91B revenue (+16.3% QoQ) and $3.51 EPS, driven by accelerating AI-related semiconductor capex. The company is investing heavily in capacity (CapEx nearly tripled to $2.26B in FY2025) while returning ~90% of earnings to shareholders via buybacks and dividends. Valuation is elevated (44x TTM P/E) but forward P/E of 28x and PEG of 1.09 are reasonable given the ~58% expected EPS growth, though China export controls and high beta remain key risks.
Macro: Bond-driven equity selloff with 30-year U.S. Treasury yield at 19-year high as U.S. debt approaches $40 trillion; hawkish Fed hold consensus with 85% odds of no rate cuts in 2026; Jackson Hole symposium 10 days away with 78% probability Fed leadership mentions 'Productivity'; recession risk priced at 8% for U.S. end-2026; Iran geopolitical tail risk building at 18% invasion probability with $58.9M Polymarket liquidity; S&P 500 closed Friday Aug 14 just 13 points below all-time high of 7,798.99.