By Nate Wolf

With data centers gobbling up chips of all kinds, the companies that equip the chip makers are set to profit, according to UBS. One big beneficiary: Applied Materials.

UBS upgraded shares of Applied Materials to Buy from Neutral and lifted its price target to $285 from $250 in a research note, arguing the company will outpace the already-hot wafer fabrication equipment, or WFE, market over the next two years.

Applied Materials shares rose 1.6% to $234.58 on Tuesday. The stock has risen 42% this year as of Monday's close but it has lagged far behind competitors like KLA and Lam Research, which have soared 80% and 108%, respectively.

"Given AMAT's stock underperformance YTD, we believe investors hold little confidence around the company's ability to outperform its served market," UBS analyst Timothy Arcuri wrote.

That conclusion doesn't hold up to muster, UBS concluded. Applied Materials is a top supplier for memory and logic chips, as well as dynamic random-access memory, or DRAM, hardware. DRAM, in particular, has entered a demand "super-cycle," and investors appear to be overlooking the company's exposure to this space, UBS argued.

The firm expects the total WFE market to expand by more than 20% next year to $136.5 billion, with most of that growth coming from memory end markets. That number could approach $145 billion in 2027, well ahead of current Wall Street expectations, UBS estimates.

"Within our coverage universe, AMAT stands out as the largest beneficiary of this DRAM spending surge," Arcuri wrote.

Applied Materials may get an unexpected boost from China, too. The company lost market share in China this year, a trend Mizuho analysts predicted would continue in a research note back in September. And most semiconductor equipment companies, including Applied Materials itself, think the Chinese WFE market will shrink in 2026.

UBS disagreed. The firm projects 11% year-over-year growth in China's WFE demand. Given the current consensus view, growth of this magnitude would be a bonus for Applied Materials shareholders.

Even with questions about the company's business in China and its underperformance relative to peers, most firms on Wall Street remain bullish. Of the 36 analysts polled by FactSet, two-thirds rate Applied Materials shares a Buy or equivalent. UBS's new $285 price target, however, is among the highest on Wall Street.

Write to Nate Wolf at nate.wolf@barrons.com

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November 25, 2025 10:15 ET (15:15 GMT)

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