One of the great stock market success stories so far in 2024 involves companies associated with artificial intelligence (AI). One business in the thick of it is chipmaking equipment supplier Applied Materials(NASDAQ: AMAT), which has seen its share price leap nearly 30% higher year-to-date, more than triple the percentage rate growth of the S&P 500 index.
One analyst tracking the company thinks Applied Materials' surge is nowhere near its end. He's even upgraded his recommendation and given his price target a hefty boost to underscore the point.
Upgrade applied to Applied Materials
The Wall Street enthusiast is Cantor Fitzgerald's C.J. Muse, who recently upped his Applied Materials recommendation to overweight (read: buy) from his preceding neutral. He also made quite the change to his price target; he now believes the tech hardware stock could hit $260 per share over the next 12 months or so, up from his previous level of $220. What's more, Muse is now including Applied Materials in his collection of top picks.
There seems to be quite a degree of confidence behind this move. That new target, after all, is more than 24% higher than the company's current share price.
Why the burst of optimism? Muse expects "positive spending reads" from the capital expenditure lines of top contract chip maker Taiwan Semiconductor Manufacturing and chip lithography systems specialist ASML. With such tailwinds, the analyst believes, Applied Materials has "a clear path to share gains" and robust profitability.
Profiting from the AI surge
The AI train is highly unlikely to slow down. In many corners of the tech industry, it's now expected that businesses will either develop their own AI apps, or they will use them to some degree. AI requires considerable processing power, so Applied Materials is swimming in a sea of sustainably rising demand.
Given this scenario, Muse's very bullish new take on the stock is quite realistic, in my opinion.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Applied Materials, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
