Applied Materials, Inc. (AMAT)

So which companies will be hurt the most by the potential downside events driving today's sell-off? Chip equipment will not be immune -- it never is -- but the fundamental demand drivers are not going away. Which means the likely scenario if things go bad is a lull of a quarter or two. Push out of equipment deliveries, not cancellations.

Thing is, we had the same sort of reaction in early 2020 at the start of the pandemic. Companies decided there'd be less demand for their products and cut back on chip orders. How'd that work out? Everyone from GM to Cisco to Apple is talking about tight chip supplies. All because of a brief period of fear of excess capacity.

This is the more likely "repeat" scenario, that a slowdown (or fear of a slowdown) leads to a brief period of underinvestment. 2 quarters of underinvestment takes about 2 years to fix.

AMAT and their peer group will be just fine. The underlying story (demand for chips) is incredible, and while risks are out there, few actually decrease the need for chips. Some of the risks actually drive demand for chips.

I have no sell orders in, but another buy in the 120's. Because this story is simply too good.

The downgrade is exactly the sort of thing some analysts have been sitting on. They are all trying to catch the inflection point, when the chip mfg biz goes from under-capacity to meeting capacity to over-capacity. So some will jump to downgrades once they perceive we hit peak under-capacity. The first one to jump is the Susquehanna guy. But here's the thing. Even if he is right that we're around the peak under-capacity, it is not at all obvious we'll get to meeting capacity anytime soon. Let alone go too far and have the chip biz hit over-capacity, which is the point equipment orders will slow/delay.

Today we have chip shortages in plenty of places. Many are forecasting it'll take a year to fully catch up. And by then, we'll have 5G phones hitting their major growth window, as 5G becomes more useful. Autonomous driving is a few more years out, but after the 5G cycle peaks, these new vehicles will suck up chips at double the rate of most of today's vehicles. And the trend towards digitization isn't slowing down even a little bit. Indeed, its now the ante for most businesses -- if you don't digitize much of your operation, no one will invest in it. And yeah, computational medicine will soak up chips like nothing else in history because biology is really complicated and the computing horsepower needed to solve things like cancers and autoimmune diseases is staggering.

All this isn't to suggest that there will never be another cloudy day for AMAT. But they'll be few and far between. And they won't last long either. Because ship consumption is going to grow enormously and for a long time. And they need $AMAT, $LRCX, $KLAC, $ASML, etc to do this.

As for AMAT, you can this set-up for a below market multiple!! Geez ...

Senior vice president and CFO, Daniel Durn sold his shares at 143.76 and 134.59.
SVP, Operations and quality, Ginetto Addiego sold his shares at 134.83
CEO, Gary E Dickerson sold over$83,469,321.00 worth shares $140.
Berkshire Capital Holdgins Inc has sold 100% of its shares.
https://wallmine.com/nasdaq/amat

The entire semiconductor sector appears to be under fire from so called "analysts" that are actually jack-of-all-trades but masters of NONE. Their archaic thinking in traditional cyclical rotations of the semiconductor industry is forcing stocks prices lower. Even when most chip and equipment companies are crushing earnings, are producing at max capacity, increasing prices, and raising guidance. Global demand would be high regardless of any shortage. 5G, AI, EV, crypto, data centers, cloud tech, gaming, eSports were already ensuring this growth and demand. Now add the new infrastructure spending and the global "arms race" that's taking place. We are in the beginning of a super cycle like never seen, likely lasting many years. Semiconductors are the new #1 global resource....the new oil.
(Fabless) companies like $NVDA, $AMD, $MRVL, $AVGO, $QCOM design the most advanced and sought after semiconductors in the world. (Fab-owning) companies like $TSM, $TXN, $ADI, $QRVO manufacture the chips. Companies like $AMAT, $ASML, $LRCX, $KLAC, $UCTT, $ICHR make all the equipment and materials used by those chip manufacturers. High tide raises all boats! .....and many of these companies are already currently undervalued. GLTA

Good grief, every time this sees 140, it acts like its seen a ghost and retreats.

There's nothing wrong with the company, its really everything one might want (fast growth, essential biz in an essential industry, well-run, highly profitable, solid balance sheet, etc).

Bizarrely its selling for less than market multiples.

Appears Wall St is spooked by past history of overcapacity leading to harsh down cycles, even though its hard to see a genuinely harsh down cycle anytime in the next decade -- just too many things need chips (with more coming like AI, autonomous driving, computational medical, etc) and you can't build chips without boatloads of AMAT eqpt.

On top of all this, there are governments wanting to insure they have native capacity. And chip users who realize that they need to rethink the value of chips in their supply chain -- they are too important to simply bid down prices. That reliable chip supply is essential and worth paying for rather than getting a low price today and being shut out of supply tomorrow.