Applied Materials (AMAT) shares surged 5.01% in pre-market trading on Tuesday, building on earlier gains following a bullish research note from Citigroup.

The rally was ignited after Citigroup placed Applied Materials on a 90-day positive catalyst watch list, urging investors to buy the stock ahead of its fiscal third-quarter earnings report scheduled for August 13. The bank expects the company's guidance for the October quarter to exceed market consensus, with its revenue and earnings per share estimates coming in 3% and 2% higher than consensus, respectively. This positive outlook was reinforced by recent target price increases from HSBC, Citi, and UBS, now ranging from $683 to $705, implying significant upside from current levels.

Citigroup's broader analysis favored semiconductor equipment stocks over the wider chip industry, citing stronger earnings revisions driven by capital expenditure increases. The sector also saw a broad uplift, with peers such as Lam Research, KLA Corporation, and ASML all trading higher in the pre-market session.