AMAT

KLA KLAC is set to report its first-quarter fiscal 2027 results on Oct. 28. For the to-be-reported quarter, KLAC expects revenues of $4 billion, plus/minus $200 million. The Zacks Consensus Estimate for revenues is pegged at $4.05 billion, indicating an increase of 26.09% from the year-ago quarter's reported figure. For the fiscal first quarter, non-GAAP diluted earnings are projected at $1.16 per share (plus or minus 10 cents). The consensus mark for earnings is pegged at $1.18 per share, unchanged over the past 30 days, indicating year-over-year growth of 34.09%. KLA Corporation price-eps-surprise | KLA Corporation Quote Image Source: Zacks Investment Research KLAC's earnings have surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 2.75%. Let us see how things have shaped up for the upcoming announcement. KLA's first-quarter fiscal 2027 results are expected to have benefited from accelerating investments in artificial intelligence (AI) infrastructure, particularly advanced semiconductor manufacturing. Increasing demand for AI processors, high-performance computing chips and sophisticated semiconductor designs is driving the adoption of KLA's inspection and metrology solutions. The transition toward 2-nanometer manufacturing and gate-all-around transistor architectures is increasing process control requirements. The company's Semiconductor Process Control business is expected to have benefited from these trends in the to-be-reported quarter. Increased investments in DRAM manufacturing, particularly high-bandwidth memory (HBM) used in AI accelerators and data centers, are expected to have driven top-line growth in the fiscal first quarter. Growing HBM adoption, increasing extreme ultraviolet (EUV) lithography applications and rising memory-device complexity are creating additional demand for process control equipment. HBM's larger die sizes, stringent performance specifications and complex stacking architectures require more sophisticated inspection and metrology capabilities. These factors bode well for KLAC. Moreover, fiscal first-quarter results are expected to have benefited from robust demand for advanced packaging solutions, supported by growing adoption of heterogeneous integration, chiplets and high-performance computing architectures. Increasing packaging complexity is encouraging semiconductor manufacturers to deploy more advanced inspection and metrology tools to improve yields and manufacturing efficiency. KLA expects its advanced packaging process control systems revenues to reach approximately $1.1 billion in calendar 2026, indicating growth of more than 70% year over year. The company is also witnessing growing adoption of its front-end inspection technologies in advanced packaging manufacturing. Meanwhile, fiscal first-quarter results are also expected to reflect improving component availability and expanding manufacturing capacity. KLA expects revenues in the second half of calendar 2026 to increase approximately 20% from the first half, reflecting accelerating customer demand and improving supply chain execution. Strong equipment orders and a backlog of approximately $12.57 billion at fiscal 2026-end are providing substantial revenue visibility. Nevertheless, KLAC management has highlighted that calcium fluoride optical components can have lead times of 18-24 months or longer, potentially limiting production flexibility. Rising memory prices have also pressured gross margins, with the company indicating a negative impact exceeding 100 basis points in recent quarters. KLA shares have returned 21.6% year to date (YTD), outperforming the broader Zacks Computer and Technology sector's return of 18%. However, the company has underperformed peers, including Applied Materials AMAT, Teradyne TER and Axcelis Technologies ACLS, YTD. Shares of Applied Materials, Teradyne and Axcelis have returned 46.1%, 58.2% and 30.3%, respectively, over the same timeframe. Image Source: Zacks Investment Research The KLAC stock is not so cheap, as suggested by the Value Score of D. In terms of the forward 12-month price-to-earnings (P/E), KLAC is trading at 25.44X, higher than the broader sector and peers like Applied Materials and Axcelis but cheaper than Teradyne. The broader sector is trading at 19.79X while Applied Materials, Axcelis and Teradyne trade at 20.69X, 20.67X and 28.37X, respectively. Image Source: Zacks Investment Research KLA's advanced packaging business represents a significant long-term growth opportunity as semiconductor manufacturers increasingly adopt chiplets, heterogeneous integration and advanced packaging architectures. The company expects KLA's share of the advanced packaging market to increase to approximately 7-8% in 2026 from only a few percentage points in 2023. The increasing application of front-end manufacturing processes in advanced packaging is driving demand for more sophisticated inspection and metrology solutions. Growing adoption of hybrid bonding and high-density interconnect technologies should further expand KLA's addressable market. The company is well-positioned to capitalize on increasing wafer fabrication equipment (WFE) spending, supported by AI infrastructure investments, semiconductor capacity expansion and technology transitions. The company raised its calendar 2026 WFE market outlook to the low-$150-billion range, representing mid-20% growth from approximately $120 billion in 2025. KLAC management indicated that industry growth in 2027 could match or exceed 2026 levels, with a scenario approaching $190 billion in WFE spending. KLA's growing installed equipment base is expected to support sustained expansion in its services business. The company has established a long-term annual services revenue growth target of 13-15%, supported by increasing equipment installations, maintenance requirements, upgrades and productivity-enhancing solutions. Approximately 80% of services revenues are contract-based, providing recurring revenue visibility. Strong equipment shipments in calendar 2026 and 2027 should expand the installed base, creating additional opportunities for service contracts and customer support. KLA's strong positioning in the semiconductor process control market, accelerating AI infrastructure investments and robust demand for advanced packaging solutions bode well for its growth prospects. Increasing process control intensity, rising HBM adoption and expanding WFE spending are expected to sustain revenue momentum. A strong backlog and growing services business further strengthen its long-term outlook. KLA currently has a Zacks Rank #2 (Buy), which implies that investors should start accumulating the stock ahead of the fiscal first-quarter earnings results. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report KLA Corporation (KLAC) : Free Stock Analysis Report Applied Materials, Inc. (AMAT) : Free Stock Analysis Report Teradyne, Inc. (TER) : Free Stock Analysis Report Axcelis Technologies, Inc. (ACLS) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Texas Instruments Incorporated TXN reported third-quarter 2026 earnings of $2.62 per share, which increased 77% year over year. The bottom line beat the Zacks Consensus Estimate by 9.2%. TXN posted revenues of $6.06 billion, which rose 28% from the year-ago quarter. The top line surpassed the consensus mark by 2.2%, driven by broad-based growth across industrial, automotive and data center markets. Data center revenues surged approximately 95% year over year. Texas Instruments' third-quarter results reflected strong growth across its Analog and Embedded Processing segments, supported by improving demand conditions across key end markets. Analog revenues came in at $4.91 billion (81.1% of total revenues), which grew 32% from the year-ago quarter. The figure came above our model estimate of $4.79 billion. The segment's operating profit increased 69% year over year to $2.51 billion, benefiting from stronger demand and improving manufacturing utilization. Texas Instruments Incorporated price-consensus-eps-surprise-chart | Texas Instruments Incorporated Quote Embedded Processing revenues totaled $858 million (14.2% of total revenues), reflecting 21% year-over-year growth. The figure surpassed our model estimate of $823.1 million. The segment's operating profit surged 110% to $227 million, supported by improving profitability as the business continued its cyclical recovery. The Other segment generated $286 million in revenues (4.7% of total revenues), declining 6% from the prior-year quarter. The figure missed our model estimate of $293.9 million. The segment's operating profit increased 106% to $142 million. Industrial revenues increased more than 40% year over year and approximately 10% sequentially, supported by demand across aerospace and defense, energy infrastructure, test and measurement, and robotics. Automotive revenues grew at a mid-teens percentage rate year over year and approximately 10% sequentially. Management highlighted improving customer demand, particularly in China and the United States, alongside increasing semiconductor content in hybrid electric and powertrain systems. Data center revenues increased approximately 20% sequentially, reflecting sustained investments in computing infrastructure. Personal electronics revenues remained approximately flat year over year but increased at an upper-single-digit rate sequentially. Communications equipment revenues grew both year over year and sequentially. Texas Instruments' gross profit increased 42.7% year over year to $3.89 billion. Gross margin expanded approximately 680 basis points (bps) year over year to 64.2%, benefiting primarily from higher revenues, alongside favorable pricing, manufacturing loadings and product mix. Selling, general and administrative expenses increased 4.2% year over year to $476 million. As a percentage of revenues, SG&A expenses contracted approximately 180 bps to 7.9%. Research and development expenses increased 2.3% year over year to $530 million. As a percentage of revenues, R&D expenses declined approximately 220 bps to 8.8%. Operating profit surged 72.8% year over year to $2.87 billion. Operating margin expanded approximately 1,240 bps to 47.5%. Texas Instruments continued expanding manufacturing capacity to support rising semiconductor demand. Management highlighted its investments in 300mm wafer manufacturing and assembly and test operations as key competitive advantages. The company is ramping manufacturing operations in Malaysia while expanding capacity at its Lehi facilities. Management also highlighted improving Analog pricing during the second half of 2026, supported by stronger demand and tighter industry supply conditions. Capital expenditure plans for 2026 remain between $2 billion and $3 billion, with spending potentially approaching the higher end depending on equipment delivery schedules. As of Sept. 30, 2026, cash and short-term investments totaled $8.14 billion. Long-term debt stood at $12.91 billion, while the current portion of long-term debt was $650 million. Texas Instruments generated operating cash flow of $3.42 billion during the quarter, while capital expenditures totaled $463 million. Quarterly free cash flow reached $2.96 billion. During the quarter, TXN repurchased shares worth $48 million and paid $1.30 billion in dividends. The company also repaid $500 million in debt. Trailing 12-month free cash flow increased 249% year over year to $8.42 billion. Management announced a 7% dividend increase to $1.52 per share, marking its 23rd consecutive annual dividend increase. Management expects fourth-quarter 2026 revenues between $5.80 billion and $6.30 billion, with a midpoint of $6.05 billion. Texas Instruments anticipates earnings per share between $2.45 and $2.79. The company expects an effective tax rate of approximately 13% for the fourth quarter and 13-14% for 2027. Management expects industrial, automotive and data center demand to support fourth-quarter performance. Continued strength in data center infrastructure investments and industrial recovery underpins the company's outlook, while manufacturing capacity expansion remains a key operational priority. Currently, TXN carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the broader Zacks Computer and Technology sector are Analog Devices ADI , Applied Materials AMAT and Cisco Systems CSCO , each carrying a Zacks Rank #2 at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Shares of Analog Devices have rallied 49.7% year to date. The Zacks Consensus Estimate for ADI's fiscal 2026 earnings is pegged at $13 per share, up by 4 cents over the past seven days, indicating an increase of 66.9% year over year. Shares of Applied Materials have jumped 59.1% year to date. The Zacks Consensus Estimate for AMAT's fiscal 2026 earnings is pegged at $12.79 per share, unchanged over the past 30 days, indicating a rise of 35.8% year over year. Cisco Systems shares have surged 39.2% year to date. The Zacks Consensus Estimate for CSCO's fiscal 2027 earnings is pegged at $5.11 per share, unchanged over the past 30 days, indicating an increase of 18% year over year. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Texas Instruments Incorporated (TXN) : Free Stock Analysis Report Analog Devices, Inc. (ADI) : Free Stock Analysis Report Cisco Systems, Inc. (CSCO) : Free Stock Analysis Report Applied Materials, Inc. (AMAT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Lam Research Corporation LRCX is scheduled to release its first-quarter fiscal 2027 results after market close on Oct. 21. The company expects revenues of $8.1 billion (+/- $400 million) for the quarter. The Zacks Consensus Estimate is pegged at $8.12 billion, indicating 52.4% growth from the figure reported in the year-ago quarter. Lam Research expects earnings of $2.15 (+/- 15 cents) per share for the first quarter. The consensus mark for first-quarter earnings has remained unchanged at $2.17 per share over the past 60 days, implying a 72.2% year-over-year increase. Image Source: Zacks Investment Research Lam Research has an impressive earnings surprise history. In the last reported quarter, it delivered an earnings surprise of 7.7%. The company's earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 7.1%. Lam Research Corporation price-eps-surprise | Lam Research Corporation Quote Our proven model does not conclusively predict an earnings beat for Lam Research this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that's not the case here. Earnings ESP: Lam Research has an earnings ESP of 0.00% at present. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter. Zacks Rank: LRCX currently carries a Zacks Rank of 2. You can see the complete list of today's Zacks #1 Rank stocks here. Lam Research's first-quarter performance is likely to have benefited from the surging demand for memory and advanced Artificial Intelligence (AI) applications. The rise in spending on AI and machine learning, particularly with the growing influence of Generative AI, is likely to have provided a significant boost to the company's performance in the fiscal first quarter. The increasing need for advanced AI-centric chips has become a key growth catalyst. Heightened DRAM spending, especially in response to demand for high-bandwidth memory (HBM), is likely to have played in Lam Research's favor. The company's momentum in 3D DRAM and advanced packaging technologies is also expected to have added to its strong performance. At the same time, ongoing technological advancements are pushing NAND spending higher, which is likely to contribute to LRCX's quarterly results. Lam Research's focus on expanding semiconductor fabrication capabilities, along with its heavy investment in research and development, positions it well in a competitive landscape. Its innovation through Semiverse solutions, particularly in high-aspect-ratio memory hole etch for NAND, is likely to have fueled this progress. LRCX's strategic investments in cutting-edge technologies are anticipated to have bolstered its performance in the foundry and logic segment, while the increasing adoption of 3D architectures is expected to have supported growth in its etch and deposition services. The company's robust suite of tools, which enable foundry logic inflections, is likely to have secured strong customer traction. With the accelerating deployment of 5G and the Internet of Things (IoT), Lam Research's semiconductor and memory solutions remain in high demand, reinforcing its market position in the fiscal first quarter. All these factors are likely to have driven growth in system revenues. The Zacks Consensus Estimate for first-quarter systems revenues is pegged at $5.61 billion, implying year-over-year growth of 58.2%, underscoring Lam Research's continued strength in the evolving tech landscape. The consensus mark for the Customer Support segment's first-quarter revenues is pegged at $2.50 billion, indicating a year-over-year increase of 40.6%. Lam Research shares have surged 54.2% year to date, outperforming the Zacks Electronics – Semiconductors industry, which has risen 12.6%. Compared with peers, the stock has outpaced ASML Holding ASML and KLA Corporation KLAC but underperformed Applied Materials AMAT. Shares of ASML Holding, KLAC and Applied Materials have soared 53.4%, 36.4% and 59.2%, respectively. Image Source: Zacks Investment Research Let us look at the value Lam Research offers investors at current levels. Currently, LRCX is trading at a premium, with a forward 12-month P/E of 26.46X compared with the industry's 11.36X. Image Source: Zacks Investment Research Compared with semiconductor giants, the stock trades at a higher multiple than Applied Materials but at a lower multiple than KLA Corporation and ASML Holding. At present, Applied Materials, KLA Corp. and ASML Holding have forward 12-month P/E of 22.63X, 28.58X and 28.89X, respectively. Lam Research is well-positioned to benefit from the rapid expansion of AI infrastructure. The company provides advanced etch and deposition equipment used by leading chipmakers, including Taiwan Semiconductor Manufacturing and Samsung. As AI processors become more powerful, semiconductor manufacturers need more advanced processes, complex chip designs, advanced packaging and HBM. These trends increase the need for the type of equipment Lam Research provides. The company's technology investments add to the growth opportunity. Its ALTUS ALD platform is aimed at improving manufacturing efficiency through molybdenum-based deposition, while the Aether platform supports the production of smaller and denser semiconductor structures. Advanced packaging is another promising area. Lam Research expects revenues from this market to grow more than 70% in 2026 following strong growth in 2025. Emerging technologies such as backside power distribution and dry-resist processing could provide additional opportunities as semiconductor designs become increasingly complex. Lam Research's consistent revenue growth is also encouraging. The company has generated more than $5 billion in quarterly revenues for five consecutive quarters, culminating in a record $6.72 billion in the last reported quarter. This consistency suggests the growth story is being supported by real semiconductor spending rather than just AI-related enthusiasm. Lam Research remains a high-quality AI infrastructure play with strong growth prospects. The AI infrastructure buildout remains in its early stages, advanced packaging demand continues to grow, and LRCX's leadership in etch and deposition gives it a competitive advantage that should be difficult to replicate. Lam Research's innovation and operational efficiency provide a solid foundation for future growth. Considering these factors, accumulating LRCX stock appears to be the most prudent strategy for investors. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Lam Research Corporation (LRCX) : Free Stock Analysis Report KLA Corporation (KLAC) : Free Stock Analysis Report ASML Holding N.V. (ASML) : Free Stock Analysis Report Applied Materials, Inc. (AMAT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

(Updates with index/price moves, macroeconomic data and company news from the first paragraph.) US equity indexes fell after semiconductor companies slumped and mixed quarterly results from mega-cap banks failed to boost risk sentiment. The Nasdaq Composite fell 0.1% to 27,226.5, the S&P 500 slipped less than 0.1% to 7,803.1, and the Dow Jones Industrial Average declined 0.3% to 51,682.3. Among stocks with market capitalization exceeding $200 billion, as many as seven of the bottom 10 were technology names, according to data compiled by Finviz. Micron Technology (MU) was the third-worst decliner in this mega-cap category, down 5.2%, after media outlets reported that China's CXMT claimed a breakthrough in DRAM technology and a new 4F2 data center chip design is slated for launch by year-end. Applied Materials (AMAT) was the steepest decliner in the pack, down 8.1%. The company opened its new $5 billion semiconductor research and development center at its Sunnyvale, California, campus to accelerate the development and commercialization of chipmaking technologies for AI. The iShares PHLX Semiconductor ETF (SOXX) was down 1.3% after midday, its sixth consecutive day of declines. In banking news, Wells Fargo (WFC) shares slid 1.7% after the lender missed Q3 revenue consensus estimates. Citigroup's (C) Q3 results beat consensus, underpinned by double-digit revenue growth in services and wealth segments, while the banking giant raised its net interest income outlook. Nevertheless, its shares dropped 3.6%. Goldman Sachs (GS) rose 0.3% after reporting Q3 earnings and net revenue above consensus estimates. JPMorgan Chase (JPM) reported Q3 earnings that were up from a year earlier but below market expectations. Its shares traded 0.3% higher. In economic news, Redbook US same-store sales surged more than 10% from a year earlier in the week ended Oct. 10, after an 8.6% increase in the previous week. Redbook said promotions rolled out to rival Amazon's Prime Day deals prompted shoppers to stock up on essentials and begin shopping for the upcoming holidays. US existing home sales rose 1.5% to 3.99 million annual rate in September from 3.93 million in August, data from the National Association of Realtors showed. That print compared with the 3.95 million rate in a Bloomberg-compiled survey. Sales were still down 2.2% from a year earlier. The National Federation of Independent Business's monthly Small Business Optimism Index fell to 97.9 in September from 98.7 in August and also lagged the 98.8 reading a year earlier. "Small business optimism stayed near the long-term average in September as Main Street owners remain uncertain about business conditions," NFIB Chief Economist Bill Dunkelberg said. "Small business owners are proceeding with caution as they interpret how rising costs, interest rates, and the difficulty in finding qualified employees are impacting their business." The International Monetary Fund has forecast the US economy will grow 2.3% this year and next. This year's outlook is unchanged from July. The IMF previously expected the growth rate to be 2.2% in 2027. US Treasury yields were mixed, with the two-year yield rising 2.3 basis points to 4.81%. The 10-year yield fell 1.7 basis points to 5.23%. The front-month US West Texas Intermediate crude oil contract rose 0.6% to $94.29 per barrel, and global benchmark Brent fell 0.6% to $105.98 per barrel. Gold futures slipped 0.3% to $4,174.5, and silver futures dropped 1.9% to $59.38.

Applied Materials (NASDAQ:AMAT) keeps adding heavyweight partners. Intel recently agreed to work with the company on next-generation transistors, interconnects, and chip packaging, just days after packaging specialist Besi expanded its own long-running collaboration. Yet the stock has spent recent weeks absorbing a very different message: worry that AI spending can't climb forever. The business is easy to describe and hard to copy. Applied sells the machines chipmakers use to deposit, etch, and shape ultra-thin layers of material on silicon wafers. It then earns steady service revenue keeping those tools running. If you've used an AI chatbot today, the chips answering you almost certainly passed through Applied's equipment. So the real question isn't whether demand is strong, even as investors look toward the other 10 Best Growth Stocks to Buy Now According to Billionaires for capital allocation ideas. It's whether investors are paying a fair price for a structural boom, or a peak price for a familiar cycle. Applied's edge is reach. Advanced AI chips need many layers of materials engineering, and Applied supplies tools across a wide span of them, from transistor formation to the advanced packaging that stacks chips together. That makes it a default call when a customer adds capacity, a position that rival process-equipment makers chase in narrower slices. Pricing power shows up in the margins. Fiscal Q3 2026 marked Applied's 13th consecutive quarter of year-over-year gross margin expansion, with non-GAAP gross margin reaching 50.4%. The services arm, Applied Global Services, lifted revenue to $1,781 million from $1,463 million a year earlier, a recurring stream that cushions the lumpier equipment business. Fiscal Q3 2026 delivered record revenue of $9.12 billion, up 25% year over year, and record non-GAAP earnings per share of $3.50, up 41%. GAAP EPS came in at $3.17, dragged down partly by swings in the value of Applied's strategic investments. The mix tells the more interesting story. DRAM, the memory that feeds AI accelerators, rose to 26% of equipment revenue from 22% a year earlier. China's share of total revenue slipped to 28% from 35%, as sales to the US, Korea, and Europe climbed. Management guided fiscal Q4 revenue to $10.25 billion, plus or minus $500 million, with non-GAAP EPS of $4.02. CEO Gary Dickerson said improved demand visibility from customers points to another strong growth year in 2027. The company is also building out a $500 million Singapore campus that more than doubles its cleanroom capacity there. Its EPIC Center partnerships, now including Broadcom, Besi, and Intel, put Applied inside customers' R&D years before tools ship, which places it alongside 11 AI Stocks That Will Go to the Moon. This is the worry that has actually moved the stock. Last month, the heads of three leading AI labs called for slowing how fast AI models improve, and chip stocks took the hit, according to CNBC. Equipment makers feel that kind of news first, because they sell against factories that don't exist yet. That's a fair concern. Chip equipment has always been cyclical, and orders can vanish long before chip sales slow, a risk that hangs over every supplier to AI hardware. Still, nothing in Applied's reported results or guidance shows a slowdown so far. Its own forecast calls for a record quarter. The risk is real, but the evidence of it hasn't arrived. At a forward P/E of 39.66, as of October 9, investors are paying $39.66 for every $1 of expected earnings. That sits well above the sector's 23.35 and far above Applied's own five-year average of 21.85. Growth is the counterweight. Analysts expect EPS to grow 44.50% in 2027, and that expected growth rate runs ahead of the forward multiple. If Applied delivers anything close to it, today's premium shrinks quickly as earnings catch up. Cash backs that up. Applied generated record operating cash flow of $3.04 billion in fiscal Q3 2026 and returned $860 million to shareholders through buybacks and dividends. Even so, the multiple leaves little margin for error. A stock priced for growth gets punished harder when growth wobbles, and that 21.85 average shows how far the multiple could fall back. Hedge fund interest dipped slightly, with 137 funds holding the stock in the most recent quarter, down from 138 in the prior one. Short interest sits at 1.78% of the float, a sign of relatively limited bearish positioning. The evidence suggests Applied's premium is buying real momentum, not just enthusiasm: expanding margins, less reliance on China, and a forecast pointing higher still. At nearly 40 times expected earnings, though, the 2027 growth story has to materialize. The setup suits growth-focused investors comfortable with semiconductor swings and a multi-year horizon. A guidance cut in the fiscal Q4 report, or clear signs that big AI customers are pausing capacity plans, would change the picture fast. While we acknowledge the potential of AMAT as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: This 6.3% Dividend Yield Looks Too Good to Ignore. Is the Stock a Buy? and 10 Best 52-Week Low Technology Stocks to Buy According to Analysts. Disclosure: None. Follow Insider Monkey on Google News.

By Noel Randewich Oct 13 (Reuters) - The Nasdaq ended lower on Tuesday, as chip stocks added to recent losses and investors parsed mixed quarterly results from Citigroup and other big US banks. The PHLX chip ‌index fell 0.23%, down for a fifth straight session, after Broadcom CEO Hock Tan on Monday ‌likened some of the investment flow into the sector to "casino gambling." Additionally, reports of technological advances by Chinese memory chip company CXMT underscored concerns ​about rising competition. Micron Technology lost 3.6% and Applied Materials dropped almost 7%. Broadcom rose 0.7%. Citigroup dipped 5.6% and Goldman Sachs lost 0.2% after both banks topped profit estimates. Wells Fargo fell 3.1% after its net interest income missed estimates, while JPMorgan Chase ended down 0.9% following a rare profit miss. Apple hit an intraday record high of $348.15 before closing up 0.1% at $341.27, putting ‌its stock market value at $4.98 trillion. Analysts on ⁠average see S&P 500 third-quarter earnings surging over 30%, fueled largely by AI-related technology companies, according to LSEG data. Expectations of a strong earnings season have offset worries about the US ⁠war with Iran, surging bond yields and inflation related to high oil prices. "A lot of investors are feeling a sense of relief that markets might start looking at earnings and less at the bond market, less at higher-for-longer oil prices and less ​at ​high interest rates," said Jake Dollarhide, CEO of Longbow Asset ​Management in Tulsa, Oklahoma. The S&P 500 declined 0.02% ‌to end the session at 7,805.45 points. The Nasdaq declined 0.15% to 27,204.38 points, while the Dow Jones Industrial Average declined 0.35% to 51,670.10 points. The S&P 500 has rallied 14% in 2026, lifted by AI-related technology stocks. However, the median stock in the index is up less than 5% and over 200 S&P 500 components are down for the year. Reflecting expectations of strong corporate earnings from AI heavyweights, the S&P 500 is trading at under 19 times expected earnings, ‌its lowest since 2023. The PHLX chip index has lost more than ​8% in the past five sessions and it remains up over ​70% year-to-date. The S&P 500 healthcare index fell 1.3% ​on Tuesday, with Johnson & Johnson down 5.7% despite topping profit estimates. Bumble jumped almost 57% after ‌the dating-app operator agreed to go private in a $1.3 ​billion deal. Domino's Pizza declined 4.8% ​after scaling back its full-year sales outlook. Advancing issues outnumbered falling ones within the S&P 500 by a 1.1-to-one ratio. The S&P 500 posted 18 new highs and five new lows; the Nasdaq recorded 47 new highs ​and 408 new lows. Volume on US exchanges ‌was relatively light, with 14.8 billion shares traded, compared with an average of 17.6 billion shares ​over the previous 20 sessions. (Reporting by Noel Randewich in San Francisco and Tharuniyaa Lakshmi and Purvi ​Agarwal in Bengaluru; Editing by Joyjeet Das and Matthew Lewis)

On October 2, a caller asked for an opinion about Applied Materials, Inc. (NASDAQ:AMAT) for the next 12 months. In response, Mad Money host Jim Cramer said: It's Gary Dickerson. The earnings look like, the PE looks like it's expensive. That's because it's probably going to blow away the earnings. I want you to stay with Applied Materials. By the way, Micron was up big at one point today. In order to be able to try to get out of the shortage situation that we're in, you need a lot of Applied Materials machines at a place like Micron or anybody else, too. Cramer also addressed Applied Materials' long-term appeal on September 9, when a caller's question about holding the stock prompted an answer that went beyond the original question. Applied Materials, Inc. (NASDAQ:AMAT) reported fiscal third-quarter revenue of approximately $9.12 billion, up 25% year-over-year. Adjusted earnings per share increased 41% to $3.50, while operating cash flow reached approximately $3.04 billion. Management identified dynamic random-access memory, leading-edge chip manufacturing and advanced packaging as important sources of expected growth. Those areas connect the company to the manufacturing investment needed for more powerful AI systems. AMAT is also expanding its footprint in another country. The company also announced on September 29 that KIOXIA would join its EPIC Center as an innovation partner. The collaboration focuses on developing next-generation memory technologies, extending the company's work with a major flash-memory producer. It is a research partnership, rather than an announced equipment order, but highlights Applied's involvement in customers' future manufacturing processes. The valuation comparison is more favorable than the absolute multiple might suggest. Applied Materials trades at approximately 30.8x forward earnings, below Lam Research's 36.5x. That does not establish that the shares are cheap, but it shows that Applied is not the more expensive company in this equipment-industry comparison. Nevertheless, both stocks trade at a significantly higher multiple than their sector median of around 24x. In September, we also drew a comparison between Applied Materials and another similar stock. China remains a significant market for Applied Materials, Inc. (NASDAQ:AMAT). It contributed approximately $2.506 billion, or 28% of fiscal third-quarter revenue, compared with 35% a year earlier. That exposure makes access to Chinese customers an important consideration along with the AI growth story. Export compliance has already carried a financial cost. In February, Applied announced a settlement with the U.S. Commerce Department over allegations concerning shipments to China between November 2020 and July 2022. The company's latest results included a $252.5 million legal settlement charge in its nine-month operating expenses. Cramer's expectation that earnings will exceed forecasts also remains an investment judgment. A forward multiple already uses projected profits, so the stock still needs the expected growth to materialize. Trading below a competitor offers useful context, but does not protect shareholders if equipment demand disappoints. Applied Materials, Inc. (NASDAQ:AMAT) appeared in 137 hedge fund portfolios as per Insider Monkey's second-quarter database, compared with 138 in the first quarter. With 4.2 million shares, Coatue Management was the top hedge fund holder of the stock in Q2. Short interest stood at 1.78% of the public float. The one-fund decline amounts to little change in participation, while the reported short position remained relatively small. Cramer seems to be willing to pay for the earnings growth he expects from expanding chip production. Applied's latest results give that view substance, and the KIOXIA partnership adds another connection to future memory technology. The stock still depends on customers turning their manufacturing plans into spending, with trade restrictions remaining a separate complication. While we acknowledge the potential of AMAT as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: Jim Cramer Looks Beyond the Numbers Ahead of Constellation Brands' (STZ) Earnings and Jim Cramer Expects Marvell's (MRVL) Next Move to Get the Chip Industry Talking. Disclosure: None. Follow Insider Monkey on Google News.

Artificial intelligence (AI) has moved from a buzzword to a spending priority. Per Gartner, global AI spending is expected to hit $2.7 trillion in 2026, up 49.5% from 2025, with AI infrastructure making up the largest share. That build-out runs on semiconductors, since every model trained and every query answered runs on chips. But a booming theme does not guarantee a dependable business. Chip earnings are cyclical, swinging with demand, inventory and capital spending. A single strong year can make almost any company look like a winner, and investors who chase headlines often get caught when the cycle turns. That is why the quality of earnings matters as much as their speed. EPS linearity measures how steadily earnings per share have climbed over time, with 100% representing a perfectly smooth, consistent rise. A high score indicates that growth has been more consistent rather than driven by a single strong period. Earnings durability is about whether a company can keep growing its profits through good times and bad. Used with long-term EPS growth, they help us find companies that can keep winning in the AI boom, not just for a quarter. We have highlighted four chip stocks, NVIDIA NVDA, Applied Materials AMAT, Taiwan Semiconductor TSM and Lam Research LRCX, with a strong Zacks Rank, high EPS linearity and durable earnings. NVIDIA pairs rapid growth with steady delivery. Over the 10-year observation window in our proprietary model, its EPS linearity is 87.6%, far above the 38% industry median. On a TTM basis, our model calculates a 10-year EPS CAGR of 78.3%. Several factors can help extend this pattern. Demand is broadening across hyperscalers, AI clouds, enterprises and sovereign buyers. NVIDIA's full-stack platform, covering CPUs, GPUs, networking, systems and CUDA software, supports training, inference and agentic AI. Its new Vera Rubin platform is starting to ramp. The company cites 30 times higher throughput per megawatt and 35 times lower token costs than Grace Blackwell Ultra, along with orders from every major hyperscaler. NVIDIA has added $150 billion to its buyback authorization, lifting the remaining total to $235 billion. The Zacks Consensus Estimate for NVIDIA's fiscal 2027 and 2028 EPS implies year-over-year growth of 94% and 68%, respectively. EPS estimates have also moved up over the past 60 days. Image Source: Zacks Investment Research NVDA currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here. Over the 10-year observation window in our proprietary model, AMAT's EPS linearity is 85.9%, far above the 46% industry median. On a TTM basis, our model calculates a 10-year EPS CAGR of 18.2%. The smooth earnings path has also come with meaningful growth. Applied Materials is benefiting as AI-driven demand is shifting chipmakers' equipment spending toward leading-edge foundry-logic, DRAM and advanced packaging, where AMAT holds leading process positions. The company expects these areas to account for about 80% of wafer fab equipment growth in 2026 and 2027. It also expects advanced packaging revenues to grow more than 70% in calendar 2026, backed by demand for HBM, 3D chiplet stacking and next-generation packaging. A broad product portfolio, rising AI-driven equipment demand and ongoing investment in manufacturing capacity support AMAT's earnings growth. The Zacks Consensus Estimate for AMAT's fiscal 2026 and 2027 EPS implies year-over-year growth of 36% and 43%, respectively. EPS estimates have also moved up over the past 60 days. AMAT sports a Zacks Rank #1. Image Source: Zacks Investment Research Over the 10-year observation window in our proprietary model, TSMC's EPS linearity is 92.3%, the most consistent among all four stocks highlighted. On a TTM basis, our model calculates a 10-year EPS CAGR of 28.7%, higher than the industry's median of 15.7%. TSMC is the world's leading semiconductor foundry, making advanced chips for many of the industry's biggest names. This puts it at the center of the AI infrastructure buildout. Demand for leading-edge chips remains immense, and sustained AI and high-performance computing demand continues to drive its growth. Management also expects continued cost improvements. TSMC is investing heavily to meet multiyear demand. Its Arizona expansion, worth an additional $100 billion, adds more 2nm-and-below fabs and advanced packaging capacity, while 13 more leading-edge and advanced-packaging fabs are coming up in Taiwan. The Zacks Consensus Estimate for TSMC's 2026 and 2027 EPS implies year-over-year growth of 55% and 29%, respectively. EPS estimates have also moved up over the past 60 days. TSM carries a Zacks Rank #2 (Buy). Image Source: Zacks Investment Research Over the 10-year observation window in our proprietary model, LRCX's EPS linearity is 79.4%, above the 46% industry median. On a TTM basis, our model calculates a 10-year EPS CAGR of 23.7%. The next leg of chip spending favors Lam Research. Memory and AI infrastructure are at the center of it. Management sees 2026 wafer fab equipment spending in the low-$150 billion range, with stronger growth expected in 2027. NAND is a key driver, as customers move to higher-layer devices that need more etch and deposition steps, which are core areas for Lam Research. AI adds another source of demand through HBM and advanced packaging. LRCX expects packaging revenues to grow more than 70% in the calendar year 2026, backed by its expertise in TSV etch, electroplating and panel-level packaging. The Zacks Consensus Estimate for LRCX's fiscal 2027 and 2028 EPS implies year-over-year growth of 60% and 22%, respectively. EPS estimates for fiscal 2028 have also moved up over the past 60 days. LRCX currently carries a Zacks Rank #2. Image Source: Zacks Investment Research Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report NVIDIA Corporation (NVDA) : Free Stock Analysis Report Lam Research Corporation (LRCX) : Free Stock Analysis Report Applied Materials, Inc. (AMAT) : Free Stock Analysis Report Taiwan Semiconductor Manufacturing Company Ltd. (TSM) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research