Morgan Stanley lifts Applied Materials price target to $502 on AI infrastructure demand
The bank raises its full-year systems growth forecast and models the company to outpace wafer fab equipment growth by more than 10 percentage points in 2026.
Morgan Stanley has raised its price target for Applied Materials to $502, representing approximately 14 per cent upside from the stock’s May 14 closing price of $440.56. The bank reiterated an overweight rating and maintained its Top Pick status for semiconductor capital equipment, citing a significantly stronger outlook for 2026 driven by artificial intelligence infrastructure demand.
The upgrade follows Applied Materials’ fiscal second-quarter results, which reported revenue of $7.91 billion, up 11 per cent year-on-year, and record GAAP earnings per share of $3.51. The company also guided fiscal third-quarter revenue to $8.95 billion, plus or minus $500 million, and non-GAAP diluted EPS to $3.36, plus or minus 20 cents. This guidance exceeded Morgan Stanley’s previous expectations for April-quarter revenue, prompting analysts led by Shane Brett to revise their forecasts.
Morgan Stanley raised its full-year systems growth forecast for Applied Materials from 28.6 per cent to 34.2 per cent. The bank models the company to outgrow 2026 wafer fab equipment growth by more than 10 percentage points, marking its strongest relative performance since 2020. Chief Executive Gary Dickerson stated that the semiconductor equipment business is expected to grow more than 30 per cent in calendar 2026, supported by the rapid global build-out of AI computing infrastructure.
The bank highlighted Applied’s market-share gains in conductor etch, noting a 300 basis point increase in 2025. Applied has confirmed engagements with major industry players including TSMC, SK hynix, and Micron on projects tied to next-generation AI chips and advanced packaging. Morgan Stanley sees the company benefiting from incremental 3nm wafer additions and unprecedented DRAM greenfield activity, positioning it to capture growth in leading-edge logic, DRAM, and advanced packaging.
Despite the bullish outlook, Morgan Stanley identified areas for future scrutiny, including Applied’s share at 1.4nm nodes and its position in future 1C and 1D DRAM nodes. The bank noted that process control remains a drag on performance and has not yet given full credit to management’s optimism in this area. However, the base case for 2026 remains positive, with the bank raising its calendar 2026 revenue and EPS forecasts and lifting its 2027 forecast as well.
