What Happened?

Shares of semiconductor machinery manufacturer Applied Materials (NASDAQ: AMAT) jumped 4.1% in the morning session after Morgan Stanley upgraded the stock's rating to Overweight from Equalweight, citing a bright outlook for the chip equipment market. 

The investment bank also lifted its price target on the shares to $209 from $172. The upgrade was driven by Applied Materials' high exposure to spending in the DRAM sector, a type of memory crucial for computers and data centers. In its analysis, Morgan Stanley raised its 2026 earnings per share forecast for the company to $10.45 from a previous estimate of $9.58. This optimistic view was part of a broader call on the sector, with the bank increasing its 2026 projection for the entire Wafer Fab Equipment market to $128 billion, fueled largely by DRAM growth. The rally also reflected a wider trend of investors returning to technology stocks.

After the initial pop the shares cooled down to $198.15, up 4.2% from previous close.

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What Is The Market Telling Us

Applied Materials’s shares are quite volatile and have had 15 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 24 days ago when the stock dropped 3.1% on the news that semiconductor stocks fell sparked by a disappointing revenue report from peer company Marvell Technology. 

The downturn was triggered after Marvell reported second-quarter data center revenue that came in below consensus estimates, causing its stock to plunge and dragging other chipmakers down with it. The negative sentiment rippled through the industry, impacting numerous major players. Applied Materials was among the affected companies, with its stock declining more than 2%. Other notable semiconductor firms like Broadcom, Lam Research, Nvidia, and Advanced Micro Devices also saw their shares fall, highlighting widespread investor concern across the sector.

Applied Materials is up 20.9% since the beginning of the year, and at $198.15 per share, it is trading close to its 52-week high of $213.89 from October 2024. Investors who bought $1,000 worth of Applied Materials’s shares 5 years ago would now be looking at an investment worth $3,423.

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