We recently published a list of Despite sell-off, analysts recommend these 10 AI semiconductor stocks. With Applied Materials, Inc. (NASDAQ:AMAT) ranking 6th on the list, the company deserves a closer look.

Despite concerns about AI stocks’ valuation, some analysts believe the companies are just getting started in the AI ​​revolution and have plenty of time left for this bull run. Last month, analysts at Cantor Fitzgerald wrote in a note that AI semiconductor companies are well positioned for the second-quarter earnings season. They also said strengths in the NAND and HDD markets and fiscal discipline make data storage companies attractive.

Cantor analysts said companies that make semiconductor equipment are still in the early recovery cycle.

Deutsche Bank also expects AI-based semiconductor stocks to perform strongly in the second-quarter earnings season. However, the company observes that investors are becoming more selective. Analyst Ross Seymore stressed that while optimism remains about the current AI frontrunners, there is also growing caution about which companies will maintain their financial gains or even record initial successes, given the ongoing uncertainty about the durability of the momentum.

Melissa Weathers, another Deutsche Bank analyst, noted that semiconductor stocks have risen 10 to 20 percent or more since the start of the second quarter, with price-to-earnings ratios reaching or exceeding previous highs. She stressed that future upside will likely depend on earnings estimate revisions.

For this article, we selected 10 AI semiconductor stocks that are favorably rated by Deutsche Bank and Cantor Fitzgerlad. For each stock, we indicated the number of hedge fund investors. Why do we care about the stocks that hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (Further details can be found here).

Applied Materials, Inc (NASDAQ:AMAT)

Number of hedge fund investors: 79

AMAT is another AI semiconductor stock that Cantor is bullish on.

Analysts at Stifel remained optimistic on Applied Materials, Inc. (NASDAQ:AMAT) after attending Semicon West 2024 in San Francisco. Brian Chin and Denis Pyatchanin believe that Taiwan Semiconductor’s continued spending will benefit the stock. They raised the stock’s price target from $240 to $275.

The story continues

Applied Materials, Inc. (NASDAQ:AMAT) is one of those not-so-fancy AI stocks that doesn’t get much attention on Wall Street. The stock, which is up 59% so far this year, received an upgrade from Barclays. The investment firm expects the stock to benefit from higher spending in the semiconductor equipment industry. Barclays expects wafer fab equipment spending to reach $96.3 billion in 2024 and $106.4 billion in 2025, above its previous estimate of $80.6 billion and $89.1 billion, respectively.

In May, Applied Materials, Inc. (NASDAQ:AMAT) released solid second-quarter results. Mizuho Securities analyst Vijay Rakesh raised his price target on the stock to $245 from $225 and maintained a Buy rating. Citi analyst Atif Malik also raised his price target on the stock to $250 from $170. The analyst sees “further upside” to Applied Materials, Inc. (NASDAQ:AMAT)’s 2025 estimates.

Applied Materials, Inc.’s (NASDAQ:AMAT) moat is strong and wide. The company makes equipment used to manufacture semiconductor chips. It has a diverse equipment portfolio aimed at the high-growth ICAPS (IoT, communications, automotive, energy, and sensors) industry. Last year, Applied Materials, Inc. (NASDAQ:AMAT) made a groundbreaking announcement with the launch of Centura Sculpta, a machine that dramatically reduces the number of steps required in chip manufacturing. Applied Materials, Inc. (NASDAQ:AMAT) said chipmakers can save a whopping $250 million in costs per 100,000 wafer starts per month of production capacity.

Wall Street expects Applied Materials, Inc. (NASDAQ:AMAT) revenue to grow 11% in 2025, while earnings growth is expected to be 15.60% in the year. The stock’s forward P/E ratio is 23.73, which, in the context of growth, is not much higher than the industry average of 27.

Overall, Applied Materials, Inc (NASDAQ:AMAT) ranks 6th on Insider Monkey’s list Despite sell-off, analysts recommend these 10 AI semiconductor stocks. While we recognize the potential of Applied Materials, Inc (NASDAQ:AMAT), we believe AI stocks promise higher returns and do so in a shorter period of time. If you’re looking for an AI stock that shows more promise than AMAT but trades at less than 5 times earnings, read our report on the cheapest AI stock.

READ MORE: Analyst sees a new $25 billion “opportunity” for NVIDIA And Jim Cramer recommends these stocks.

Disclosure: None. This article was originally published on Insider Monkey.