Applied Materials Inc (NASDAQ:AMAT) shares rose about 8% in premarket trading after Barclays upgraded the stock to Overweight from Underweight, citing improving prospects tied to artificial intelligence-related capital spending.
According to the firm, proximity to AI has been the dominant factor behind U.S. semiconductor stock performance. While the timing and scale of AI deployments remain debated, proposed investment levels point to a multi-year earnings tailwind for companies closely linked to the buildout.
Applied Materials has lagged peers, with shares gaining just 12% in 2025, reflecting investor concerns over China exposure and competitive pressures. Barclays said those risks are now largely priced into the stock, while rising foundry and DRAM spending makes Applied’s exposure to those markets increasingly attractive relative to competitors.
Barclays said its preferred names across the AI ecosystem include NVIDIA in compute, Micron Technology in storage, Credo Technology and MTSI in interconnect, and KLA Corporation in capital equipment.
Looking ahead to 2026, Barclays expects stock performance to increasingly favor companies directly tied to the core components of the AI infrastructure buildout. The firm highlighted Corning, KLA Corporation, MTSI, Micron, and NVIDIA as favored names, while taking a more cautious view on Cirrus Logic, Qorvo, Skyworks Solutions, and Texas Instruments due to their exposure to consumer and analog markets.
On AI infrastructure, Barclays said compute-related announcements imply roughly 20 gigawatts of deployments in calendar 2027, with power availability emerging as the primary constraint. The firm believes NVIDIA is positioned to capture the majority of that demand, estimating around $45 billion of upside to its revenue forecasts for both 2026 and 2027. Upcoming model launches in late Q1 or early Q2 were flagged as a key inflection point for investor confidence in returns on AI spending.
In storage, Barclays expects NAND supply discipline to hold through at least the first half of the year, supporting the near-term investment case, while high-bandwidth memory remains the longer-term structural growth driver. However, the firm cautioned that limited capacity and elevated pricing could pressure consumer devices, weighing on companies with heavier exposure to that segment.
More about Applied Materials
Applied Materials is a leading supplier of equipment, services, and software used in semiconductor manufacturing. The company plays a critical role across foundry, logic, memory, and advanced packaging markets, supporting global chip production for applications ranging from consumer electronics to artificial intelligence and data centers.